With forecasts looking bearish through early next month, and with the market continuing to digest the latest government inventory numbers, natural gas futures were trading slightly lower early Friday. The September Nymex contract was down 2.5 cents to $2.134/MMBtu as of 8:30 a.m. ET.
Weather models were mostly unchanged overnight, with some adding a few cooling degree days (CDD) but not enough to erase bearish weather sentiment through early September, according to NatGasWeather.
“A drop under $2.10 means a retest of $2 could be coming unless much hotter weather trends occur,” the forecaster said. “Overall, no major changes to our thinking as the coming pattern simply won’t be hot enough to intimidate, as national forecast CDDs drop to near or below normal, resulting in larger than normal builds that could approach 90 Bcf several weeks earlier than normal.”
This would add to a potentially hefty end-October carryout of close to 3.8 Tcf, NatGasWeather said.
As for this week’s storage report, the Energy Information Administration (EIA) reported a 59 Bcf injection into inventories for the week ending Aug. 16, compared with last year’s 47 Bcf injection and the five-year average injection of 51 Bcf. Total working gas in storage as of Aug. 16 stood at 2,797 Bcf, which is 369 Bcf more than last year at this time but still 103 Bcf below the five-year average, EIA data show.
After a “small reprieve” last week, this week’s injection showed the market pushing back into “slight oversupply territory” to the tune of about 1 Bcf/d, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
“Year-to-date, 1.7 Tcf of natural gas has been injected into storage caverns across the Lower 48. This compares to historical norms of only 1.3 Tcf (34% higher) and has inflated inventories to a 4% deficit to the five-year average versus 22% when injection season began,” the TPH analysts said.
“It’s our view that the U.S. natural gas market will remain oversupplied in 4Q2019 and 1Q2020 with inventories exiting the year at an 18% surplus to the five-year average.” Prices should “remain under pressure on the assumption that gas volumes continue to ramp (highs of 92.7 Bcf/d this week) into the full start-up” of Kinder Morgan Inc.’s Gulf Coast Express pipeline.
Between surging dry gas production and liquefied natural gas feed gas volumes hitting 6.5 Bcf/d recently, next week’s EIA report “should be an interesting one to watch,” according to the TPH team.
Genscape Inc. analysts viewed the reported 59 Bcf build as implying the market was about 1.2 Bcf/d loose versus the prior five-year average when compared to degree days and normal seasonality.
“With roughly 11 more weeks of injections ahead, current forward curves indicate storage is trending to finish the injection season with about 3,660 Bcf in the ground before winter,” the firm said.
That’s slightly leaner than recent Intercontinental Exchange EIA End of Storage Index futures, which settled Thursday at 3,767 Bcf.
October crude oil futures were trading $1.84 lower at $53.51/bbl at around 8:30 a.m. ET, while September RBOB gasoline was off about 4.2 cents to $1.6255/gal.