Cooler overnight forecasts helped offset a bullish round of weekly storage data to send natural gas futures several cents lower early Friday. The September Nymex futures contract was down 3.7 cents to $2.195/MMBtu shortly after 8:30 a.m. ET.
Guidance shifted cooler overnight, especially the European model, according to Bespoke Weather Services.
“This comes from rain risks in parts of the South late next week into next weekend that can cut into heat somewhat, along with a little more variability in the Midwest to East late month,” the forecaster said. “The next few days remain quite hot,” with near-record daily gas-weighted degree days expected during the first half of next week.
Bespoke said the sell-off early Friday appeared to be tied to the cooler European data, though recent production data had also shifted slightly higher.
“As far as price action, we would not be surprised at a further move lower into cash, but curve structure is improving somewhat,” and Thursday’s bullish miss from the Energy Information Administration’s (EIA) latest storage report “is still fresh in the minds of many, so any move lower from here into cash may have a difficult time holding.”
The EIA reported a 49 Bcf injection into U.S. natural gas stocks for the week ending Aug. 9, surprising analysts who had called for a build nearly 10 Bcf higher. The 49 Bcf figure compares with last year’s 35 Bcf injection but is on par with the 49 Bcf five-year average.
Working gas in storage as of Aug. 9 stood at 2,738 Bcf, which is 357 Bcf above year-ago levels and 111 Bcf below the five-year average, according to EIA.
“For only the second time this injection season U.S. natural gas inventories printed at or below the five-year average,” said analysts at Tudor, Pickering, Holt & Co. (TPH). “...Sweltering temperatures in parts of the Lower 48 drove weekly power generation to the highest level on record (42.5 Bcf/d) and forced gas out of storage caverns in the South Central region. Total degree days for the week shook out 5% above norms, temporarily pushing the market into balance after being about 2 Bcf/d oversupplied, on average, for the past six weeks.”
The TPH analysts said they’re expecting the market to move into balance in the second half of 2020, with around 3.5 Bcf/d of incremental demand gains forecast to surpass 1.9 Bcf/d of incremental supply next year.
Meanwhile, on the supply side Kinder Morgan Inc.’s 2 Bcf/d Gulf Coast Express, expected to release additional trapped Permian Basin associated gas volumes into the market, has already started flowing gas, part of the commissioning process as the project moves toward an expected Sept. 20 start date.
TPH analyst Jordan McNiven told NGI that the firm’s estimates show about 1 Bcf/d of flaring in the Permian as of the second quarter. Once fully in-service, TPH expects the pipeline to run at 1.3-1.5 Bcf/d before ramping up to full capacity by 1Q2020.
“We expect this exacerbates oversupply currently seen in the market, which we expect to persist through 1Q2020,” McNiven said.
September crude oil futures were up 35 cents to $54.82/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was up about 1.7 cents to $1.6537/gal.