Warmer trends from the latest weather data had natural gas futures trading lower early Friday, although forecasters pointed to uncertainty surrounding guidance for the mid-November pattern. At around 8:40 a.m. ET, the December Nymex contract was down 2.0 cents to $2.613/MMBtu.
Weather models shifted in the warmer direction Thursday afternoon and into the overnight runs, with changes focused in the 11-15 day period, according to Bespoke Weather Services.
While not necessarily warm overall, models “have at least reverted back to a normal national demand pattern in the medium range, with cold in the northern tier, a warm west and variability elsewhere,” the forecaster said. “What happens from here is a little uncertain, however, as the pattern at the end of the runs still shows lingering upper level ridging along the West Coast, which means risk of more downstream colder shots into the eastern U.S. despite the lack of any blocking on the Atlantic side.”
This points to more model volatility ahead and suggests “any switch to a true warmer pattern” will be delayed, Bespoke said.
EBW Analytics Group analysts said the mid-November pattern will be key for the market. They described guidance early Friday as “highly conflicted” for this period.
“Echoing yesterday afternoon’s trends, the European model sheds projected demand in Days 11-15,” the EBW analysts said. “The American model, however, which has been more accurate near-term, remains colder than normal.
“We expect the cash market to remain strong today, helping to support futures. The next several model runs will be critical, however, and could lead to a significant move in either direction when trading resumes Monday.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported an 89 Bcf injection into U.S. gas stocks for the week ended Oct. 25, easily surpassing last year’s 49 Bcf injection and the 65 Bcf five-year average. Total working gas in storage ended the period at 3,695 Bcf, 559 Bcf above last year and 52 Bcf above the five-year average, according to EIA.
“Compared to degree days and normal seasonality, the reported injection appears loose by approximately 5.3 Bcf/d versus the prior five-year average,” Genscape Inc. senior natural gas analyst Rick Margolin said of this week’s EIA data. “With one more report to go to close out the summer strip,” Genscape’s daily supply and demand modeling “is currently anticipating the week ending Nov. 1 will show an injection of roughly 57 Bcf.”
Genscape expects next week’s EIA number to be the last reported injection of the season, Margolin said.
December crude oil was trading 68 cents higher at $54.86/bbl at around 8:40 a.m. ET, while December RBOB gasoline was up about 2.6 cents to $1.6208/gal.