Cooler overnight trends in the latest guidance helped push natural gas futures slightly higher in early trading Tuesday, although questions lingered as to how long upcoming cold will stick around. The November Nymex futures contract was trading 1.4 cents higher at $2.252/MMBtu at around 8:40 a.m. ET.
Weather models still show “numerous cold shots” for late October into early November, according to NatGasWeather. With the exception of the European model, all weather models trended colder overnight, but it will likely take more sustained cold to impress the market given current oversupply conditions, the forecaster said.
“It’s helpful all overnight models added demand, but the fact the European model failed to trend colder to match could disappoint/frustrate the natural gas markets,” NatGasWeather said. There is “no change to our view. It’s going to take cold lasting for a prolonged period to intimidate this woefully oversupplied commodity.
“And while the coming cold shot at Oct. 29-Nov. 3 is plenty cold enough, it needs to prove it will last longer to impress, and the overnight data wasn’t convincing enough to do so.”
Maxar’s Weather Desk noted small cooler adjustments to its updated forecast for next week into early November. For Oct. 27-Oct. 31, “another round of cold high pressure will make its way from the West toward the Midcontinent during this period, and the forecast undergoes a modest cold change here in association.
“Temperatures are forecast to average in the much and strong below normal categories from the Rockies toward the Plains, and this includes parts of Texas and the Midwest late. Out ahead, however, are warmer changes in the Eastern Third, where conditions are unsettled while on the warm side of normal. Given an increasingly sharper temperature gradient along with timing uncertainty, confidence is lowered slightly.”
From Nov. 1-Nov. 5, Maxar noted a “modest cool change” for the eastern half of the Lower 48 early in the period. However, the pattern suggests cold could be “transient” for the eastern third of the country.
Meanwhile, looking ahead to this week’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for an 89 Bcf injection, pointing to a week/week “surge” in gas-weighted heating degree days, which is expected to keep the upcoming injection figure “decidedly below the triple-digit mark.
“A bump in residential/commercial demand by 3.5 Bcf/d week/week will be enough to offset the 0.5 Bcf/d week/week increase in production and 1.8 Bcf/d week/week decline in gas in power,” Energy Aspects said. “The stronger residential/commercial heating demand to close the shoulder season has taken down our end-October estimate to 3.72 Tcf” based on recent forecasts.
November crude oil futures were up 45 cents to $53.76/bbl at around 8:40 a.m. ET, while November RBOB gasoline was trading fractionally higher at $1.6110/gal.