With a somewhat cooler outlook from the overnight forecasts, and with the market continuing to mull Thursday’s government inventory data, natural gas futures were trading several cents lower early Friday. The September Nymex futures contract was off 5.1 cents to $2.077/MMBtu shortly after 8:30 a.m. ET.
Weather models trended slightly cooler overnight, with changes focused around late next week into next weekend, according to Bespoke Weather Services.
“These are noise-level changes in our view, as the pattern as a whole remains locked into its overall state,” with gas-weighted degree day totals well above normal over the 15-day outlook period, Bespoke said. “Regionally, the South, especially Texas, is where the strongest heat is located the next several days before above normal heat expands into the Midwest and East after the middle of the month.
“There has been a subtle move cooler at the end of the 11-15 day in the central U.S., with heat easing off in Texas, while the West sees the return of above normal temperatures, still above normal nationally, just some variation regionally.”
Meanwhile, the Energy Information Administration (EIA) reported a 55 Bcf injection into storage inventories for the week ending Aug. 2. The build came in below consensus but still well above last year’s 46 Bcf injection and the five-year average injection of 43 Bcf.
“After adjusting for degree days (up 4% versus the norm) the storage injection implies a 1 Bcf/d oversupplied market,” analysts with Tudor, Pickering, Holt & Co. (TPH) said. “The world record for a person staying awake is 11 days, which is about as long as the current power generation record (42.0 Bcf/d) will last; the high water mark set two weeks ago is about to get bounced with this week at around 42.8 Bcf/d.
“Despite the swelter, we’re forecasting another above average build of 55 Bcf/d next week,” as maintenance at the Sabine Pass liquefied natural gas terminal has cut around 2 Bcf/d of demand.
Genscape Inc. analysts said the 55 Bcf figure is about 1.8 Bcf/d loose versus the five-year average when compared to degree days and normal seasonality.
“This is consistent with the average looseness we have seen over the last eight weeks,” the firm said.
Raymond James & Associates Inc. analysts calculated the build as 1.4 Bcf/d looser compared to the same week last year, not including weather-related demand. Over the past four weeks, balances have averaged 1.9 Bcf/d looser, according to the firm.
The EIA report missed to the low side of estimates and helped boost futures prices Thursday, but it wasn’t enough to push the front month above a key resistance level, according to analysts at EBW Analytics Group.
“As has been true all week long...the September contract was unable to overcome resistance near $2.15...Prices could softent today heading into the weekend. With hotter weather in the forecast for early next week, another push upwards is possible soon,” EBW said. “The upside potential is extremely limited, though, since mid-summer heat is expected to fade significantly in Week 3.
“The most likely scenario, therefore, is for the September contract to continue to be beaten back each time it rallies and to go off the board later this month just slightly above $2.00.”
September crude oil futures were trading 65 cents higher at $53.19/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was up about 2.1 cents to $1.6664/gal.