Additional heat in the forecast overnight helped push natural gas futures several cents higher in early trading Tuesday. The October Nymex contract was up 4.5 cents to $2.630/MMBtu shortly after 8:30 a.m. ET.
According to NatGasWeather, most of the weather data again trended hotter overnight, adding a few cooling degree days to the outlook.
“No major changes overall, with a hotter than normal late summer pattern on tap the next 10 days, but still with a rather bearish setup” further out around Sept. 20-25, the forecaster said. The theme the past few weeks, said NatGasWeather, “has been to add demand as days in the 11-15 day forecast roll into the front 10 days. With that said, notably hotter trends are less likely to occur for the Sept. 20-25 period” as both the American and European models favor “strong high pressure over the southern and eastern U.S.” gradually shifting over the West.
“But the damage has been done where hotter trends in recent weeks have at times served as a catalyst for shorts to cover,” NatGasWeather said. “Even with recent hotter trends, the next three storage reports are still likely to print in the upper 70s to 80s Bcf range, near or larger than five-year averages.”
Strong heat in Texas, the Southeast and the Midwest helped drive Monday’s rally in the natural gas markets, according to analysts at EBW Analytics Group. This intensified “an already epic short squeeze” and sets up the October contract for a “key test of resistance” at $2.63, the 200-day moving average.
“Under most circumstances, the 200-day average holds the first time it is tested,” the EBW analysts said. “It is still possible it will hold this morning. With an increasing number of shorts being required to cover every day, though, there is a significant possibility resistance will be overcome, sending futures even higher.
“The furious rally during the past two weeks has far outstripped the fairly modest increase that has occurred in weather-driven demand, which justifies no more than a 5-10 cent gain. It may take some time, however, for the market to settle back down.”
Meanwhile, liquefied natural gas (LNG) feed gas deliveries have pulled back since starting the month at close to 6.6 Bcf/d, according to Genscape Inc. Volumes for Tuesday were down to 5.4 Bcf/d.
A three-day planned maintenance event on the Transcontinental Gas Pipe Line (aka Transco) impacting north-to-south flows through its Station 45 dropped deliveries at an interconnect with Cheniere Energy Inc.’s Sabine Pass terminal to zero Tuesday, Genscape analyst Allison Hurley said.
“Nominations headed to Sabine Pass LNG via Creole Trail have increased about 567 MMcf/d to accommodate for the loss of volumes from Transco,” Hurley said. “Total aggregate flows to Sabine Pass have dropped by roughly 290 MMcf/d today compared to the previous seven-day average.”
October crude oil futures were trading 68 cents higher at $58.53/bbl shortly after 8:30 a.m. ET, while October RBOB gasoline was up about 1.8 cents to $1.6027/gal.