Natural gas futures were trading slightly lower early Tuesday as the market shrugged off colder forecast trends overnight. The November Nymex contract was down 2.8 cents to $2.275/MMBtu shortly after 8:40 a.m. ET.
After failing to add demand over the weekend, weather models trended colder Monday and overnight heading into Tuesday’s trading, according to NatGasWeather. The Global Forecast System (GFS) added 6-7 heating degree days (HDD) compared to 24 hours earlier, with the European model adding 10-11 HDDs, the forecaster said.
“Both are resolving a stronger reinforcing cool shot across the northern U.S. Oct. 16-18,” NatGasWeather said. “Most of the data remains bearish Oct. 19-23 with warm conditions returning across the Midwest and Northeast,” but “this period could be subject to cooler trends in time. The coming pattern still wouldn’t be considered bullish, but demand has been added, and the markets could notice and want a few cents back.”
Meanwhile, looking nearer term, this week should see nationally weighted degree days flip from cooling to heating, right on schedule based on historical norms, according to Genscape Inc.
“Genscape meteorologists are forecasting Lower 48 population-weighted degree days will transition to heating territory tomorrow and reach as much as 5.6 HDDs by the weekend,” senior natural gas analyst Rick Margolin said. “The bulk of the transition is being driven by notably colder-than-normal temperatures across the West. A cold front is descending from Western Canada into the U.S. and will make its way into the central part of the country later this week.”
This cold front should push Lower 48 demand up to as high as 71 Bcf/d by Thursday, with demand averaging 68.6 Bcf/d over the next seven days, according to Genscape’s daily supply and demand estimates.
“The near-term demand outlook is slightly weaker than this same time last year due to this October running slightly warmer,” Margolin said. “In 2018 and 2017, the first major cold shots did not really hit until the second week of November; in 2016 the first significant cold spell to lift demand above the 80 Bcf/d mark didn’t arrive until the end of November.”
In terms of balances, recent estimates from Energy Aspects were pointing to triple-digit storage injections continuing at least through the week ending Oct. 18, with another near-100 Bcf build possible for the week ending Oct. 25.
Despite September heat and maintenance-related impacts on production, “our view of a very loose market to close out the shoulder season remains,” the firm said. “Our weekly balances then show injection activity extending through the week ending Nov. 15, based on 10-year normal weather, which could put peak inventories near 3.9 Tcf before withdrawals take hold.”
Energy Aspects issued a preliminary estimate for a 100 Bcf injection for this week’s Energy Information Administration storage report.
“Yet another weekly surge in production (up 0.8 Bcf/d week/week) should lead to a third consecutive triple-digit build,” according to the firm. “A projected 1.7 Bcf/d week/week ramp-up in gas burn in the power sector should add enough demand” to keep the build near 100 Bcf instead of in the neighborhood of 110 Bcf.
November crude oil futures were down 73 cents to $52.02/bbl shortly after 8:40 a.m. ET, while November RBOB gasoline was trading about 2.2 cents lower at $1.5475/gal.