An exceptionally hot pattern to close out September, reinforced in the latest guidance, helped nudge natural gas futures higher in early Wednesday trading. The October Nymex contract was up 1.9 cents to $2.687/MMBtu shortly after 8:40 a.m. ET.
A weather outlook that already featured record-level cooling degree days (CDD) trended slightly hotter in the latest data, Bespoke Weather Services told clients early Wednesday. The pattern is expected to bring more 90-degree heat late next week into early October for portions of the South.
While total gas-weighted degree days “are just near normal, we must emphasize” that this is a result of below-normal heating degree days (HDD) countering the elevated CDD levels, Bespoke said. “Given that any HDDs really have little impact at this time of year in terms of true demand, even if technically present, we still view this current pattern as bullish all the way into the start of October.
“If we stay warm beyond that point, as we are expecting, that is the time when above normal temperatures will indeed begin to transition into a bearish factor for the market.”
The forecast heading into Wednesday’s trading “continues the trend of warmer weather extending further into the fall,” said analysts with EBW Analytics Group, who also noted that higher cooling degree days in the 11-15 day window are partially offset by lower heating demand expectations for the period.
“The October contract is likely to probe higher again this morning,” according to EBW. “Another test of resistance at $2.70-2.71 is possible. But if warmer-than-normal weather continues to extend into October -- as seems likely -- it will have an increasingly bearish impact, suppressing space heating demand and pulling down the front month contract.”
Looking at the supply picture, production has been in a “moderate retreat” recently, according to Genscape Inc.
“Lower 48 production has been underperforming of late, though we have increased our long-range expectations for growth,” Genscape senior natural gas analyst Rick Margolin told clients Wednesday. “Our top-day estimate of Lower 48 production is showing a day/day drop of more than 0.8 Bcf/d. While top-day estimates tend to get revised up during shoulder season, over the past seven days production is averaging 90.66 Bcf/d, which is nearly 0.95 Bcf/d below the prior 30-day average and a full 1 Bcf/d below our forecast for the month.”
Even so, the firm has increased its long-range production expectations.
“In our latest major production forecast update published Monday, we increased our outlook for Calendar 2019 production by nearly 0.5 Bcf/d,” Margolin said. “We are now looking for a year/year production gain of more than 7.6 Bcf/d.”
Meanwhile, the Houston area was under continuing threat from heavy rains and significant flooding as Tropical Depression Imelda moved inland Tuesday, according to the National Hurricane Center (NHC). At 5 a.m. ET, Imelda was about 25 miles north-northwest of Houston.
“Imelda is expected to produce total rainfall accumulations of six-to-12 inches, with isolated maximum amounts of 18 inches across portions of eastern Texas, including the Houston and Galveston areas,” the NHC said.
October crude oil futures were down 95 cents to $58.39/bbl just after 8:40 a.m. ET, while October RBOB gasoline was down about 2.8 cents to $1.6476/gal.