Additional cold trends in the overnight guidance, albeit with a possible endpoint in sight for an upcoming stretch of frigid November temperatures, helped push natural gas futures higher in early trading Thursday. The December Nymex contract was up 3.0 cents to $2.721/MMBtu at around 8:30 a.m. ET.
Looking at the overnight weather data, the Global Forecast System (GFS) added more heating demand to the outlook compared to previous runs but showed cold fading by the end of the second week of November, according to NatGasWeather. The forecaster said the pattern remains “quite bullish” up until around Nov. 12-14, including a “frigid cold shot” expected to arrive into the Northern Plains before spreading south and east starting around Nov. 7-11.
After this cold shot, however, “the weather data shows cold losing its grip and demand fading, although there are still ways cold continues to sneakily slide into the northern U.S.,” NatGasWeather said. The pattern “would look more ominous if cold showed better potential” to linger into mid-November, “which it failed to do overnight.”
Meanwhile, the Energy Information Administration (EIA) is scheduled to release its weekly storage inventory report at 10:30 a.m. ET, and estimates have generally been pointing to an injection in the mid 80s to low 90s Bcf.
A Bloomberg survey of 13 analysts showed a median build of 85 Bcf. A Reuters poll of 18 market participants had a range from 66 Bcf to 94 Bcf, with a median of 85 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled at 91 Bcf Wednesday, while NGI projected a 93 Bcf injection.
Last year, the EIA recorded a 49 Bcf injection, while the five-year average build stands at 65 Bcf.
“There was a nice mix of warm and cool areas across the country, coldest over the West and warmest in California, Texas and Florida” during this week’s EIA report period, NatGasWeather said. “Our algorithm predicts a build of 90-91 Bcf.”
Factoring in recent production gains, partially offset by higher heating demand expected for November, analysts at Goldman Sachs said this week that they’ve increased their end-October 2019 inventory expectations by 19 Bcf to 3,730 Bcf. The firm revised its end-March 2020 inventory projection 123 Bcf higher to 1,712 Bcf.
“U.S. gas production has grown on average 1.6 Bcf/d since Oct. 18” compared to the Oct. 1-17 period, “with most of that growth once again driven by the Appalachia region,” the Goldman analysts said. “We believe this jump may have been driven by an attempt to allocate production growth in the winter period, which represents the best upside potential for prices, especially given the context of a very well-supplied summer expected next year.”
The latest adjustments to Goldman’s balances “reinforce our view” that Nymex prices in 2020 and 2021 “need to remain low to disincentivize Appalachia production growth to keep inventories manageable.”
As of 8:30 a.m. ET, December crude oil futures were trading at $54.44/bbl, down 62 cents, while December RBOB gasoline was trading fractionally lower at $1.6128/gal.