Natural gas futures were trading slightly lower early Friday as significant model differences on the intensity of cold later this month continued in the overnight guidance.The November Nymex contract was trading 1.3 cents lower at $2.305/MMBtu shortly after 8:30 a.m. ET.
The American model trended colder overnight, but the milder European model remained “basically unchanged” from Thursday’s outlook, widening the gap between the two datasets, according to Bespoke Weather Services.
“Both models do feature the ridge west/trough east look through days eight through 15,” but the American model is stronger than the European with the pattern, Bespoke said. “As is often the case, the answer likely lies in the middle, which is where we put our official forecast.
“We do still see lower demand days this weekend into the first half of next week before the cold arrives, taking demand above normal next weekend into the following week. We also continue to favor a colder start to November but still are not convinced that cold lasts beyond the first week of the month.”
Meanwhile, on Thursday the Energy Information Administration (EIA) reported a 104 Bcf injection into natural gas storage inventories for the week ending Oct. 11, marking the third time in four weeks that stocks have risen by at least 100 Bcf. The reported build easily surpassed last year’s 82 Bcf injection and the five-year average of 81 Bcf, but it did fall on the lower end of expectations. Total working gas in storage ended the period at 3,519 Bcf, 494 Bcf above year-ago levels and 14 Bcf above the five-year average.
With residential/commercial demand increasing, this week’s report could “mark the low point for shoulder season demand and the last triple-digit build,” according to analysts at Tudor, Pickering, Holt & Co. (TPH). The 104 Bcf build indicates an oversupply of around 3.5 Bcf/d adjusting for weather, they said.
“Given the oversupply, we expect inventories to continue to build versus the five-year average and exit 2019 at around 3.5 Tcf, or about 9% above the five-year average,” the TPH team said. “Key to firming up the market in 2020 will be the supply response to lower pricing, and with producers messaging maintenance” capital expenditure budgets for 2020, “we expect to see volumes begin to rollover in the new year.”
While the natural gas markets look ahead to winter, Mother Nature is serving up a reminder that tropical cyclone season isn’t finished. As of 8 a.m. ET, the National Hurricane Center (NHC) was monitoring “Potential Tropical Cyclone Sixteen” in the Gulf of Mexico, which could develop into a tropical or subtropical storm later Friday.
The system was about 350 miles south-southwest of the mouth of the Mississippi River and traveling northeast at 21 mph.
“On the forecast track, the system will approach the northern Gulf Coast later today and tonight, and then move inland over portions of the southeastern United States on Saturday and Saturday night,” the NHC said.
November crude oil futures were up 50 cents to $54.43/bbl shortly after 8:30 a.m. ET, while November RBOB gasoline was trading about 1.3 cents higher at $1.6352/gal.