Natural gas futures were trading slightly higher early Friday as forecasters noted hotter trends for late September in guidance overnight. The October Nymex contract was trading 1.0 cent higher to $2.548/MMBtu at around 8:40 a.m. ET.
Heading into Friday’s session, Bespoke Weather Services pointed to additional warm trends for late September in its latest forecast.
“Yet another sizable hotter weather forecast change is seen this morning in what is already projected to be the hottest September on record,” Bespoke said. “In addition, even though the 11-15 day extends into the first few days of October, that, too, still looks bullish in terms of cooling demand, as we may see record highs to open the month.” Temperatures of 90 degrees or hotter are possible up into the Mid-Atlantic, “with the South remaining summer-like as well.”
The forecaster cautioned that “the clock is ticking” for above-normal temperatures shifting from bullish to bearish in terms of their impact on weather-driven demand.
“If the warmer base state persists deeper into October, as we currently think it will, weather will quickly transition into a bearish factor” as heating demand “will be very minimal,” Bespoke said.
Analysts at EBW Analytics Group also pointed to the potential for the widespread above-normal temperatures in the forecast to start having a bearish impact on demand as the calendar flips to October.
“Over the next three weeks...as warmer-than-normal weather extends further into October, air conditioning demand will largely disappear and early season space heating demand will remain depressed,” the EBW analysts said. “As this occurs, injections could reach the mid-90 to 100 Bcf level, eliminating the storage deficit versus the five-year average almost entirely by mid-October and limiting the potential for futures to rebound.”
NatGasWeather viewed the overnight data as mixed, noting a decline in cooling degree day (CDD) totals in the latest Global Forecast System (GFS) data, which was offset by a “rather hefty” addition of CDDs in the European model’s outlook.
Recent data has trended hotter for the southern and eastern United States, “adding several Bcf in demand,” the forecaster said. “The pattern the first week of October continues to look quite bearish for most of the U.S. as high pressure again weakens. To our view, the natural gas markets could notice the European added demand overnight on further hotter trends across the South and East Sept. 27-30 even though the GFS is less impressive with it.
“...The risk going into the weekend is that the data will trend a little further hotter around the start of October.”
October crude oil futures were up 51 cents to $58.64/bbl at around 8:40 a.m. ET, while October RBOB gasoline was off fractionally to $1.6986/gal.