With overnight guidance backing off on expected cold after the second week of November, natural gas futures were trading lower early Thursday. The December Nymex contract was down 2.7 cents to $2.801/MMBtu at around 8:40 a.m. ET.
Both the American and European models dropped heating demand from their respective forecasts overnight, according to NatGasWeather.
The lost demand resulted partly from models “backing off just slightly on next week’s frigid Arctic blast,” the forecaster said. But as important, the latest data also “favors warmer conditions building over the northern and eastern U.S.” during the Nov. 18-22 period. Absent additional colder trends after Nov. 18-19, the outlook “will take on a bearish lean.”
“Overall, the coming pattern is solidly bullish through next week but increasingly bearish after in the overnight data,” NatGasWeather said. “With prices again testing $2.90 and failing Wednesday, and with milder overnight trends, it might take a rather bullish storage report miss to again test $2.90.”
Estimates suggested a build around 45 Bcf for this week’s Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET. A Bloomberg survey showed a median prediction of 45 Bcf for the storage week ended Nov. 1, with estimates ranging from 31 Bcf to 51 Bcf. That would compare with a 63 Bcf injection recorded in the year-ago period and the 57 Bcf five-year average.
Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at 43 Bcf; NGI’s model predicted a build of 44 Bcf.
“It was colder than normal over the western two thirds of the country and warmer than normal over the eastern third” during this week’s report period, NatGasWeather said. “Our algorithm expects a 41-42 Bcf injection, a touch bullish to surveys, although lost demand overnight could be more important than few Bcf storage report miss.”
Analysts at EBW Analytics Group also pointed to evidence of the current cold pattern weakening later this month. Toward the end of the 15-day forecast window, models suggest a breakdown of the ridge over the eastern Pacific that’s enabling cold air to pour into the Lower 48 from Canada, they said.
“The speed at which natural gas prices are likely to fall remains uncertain,” according to EBW. “Brutally cold weather is still forecast for next week, and model runs could continue to fluctuate over the next 24-48 hours. Survey estimates predicting a 42-45 Bcf injection this morning may also prove to be too high.
“If the expected breakdown of the ridge validates, however, prices could sink over the next seven to 10 days.”
December crude oil futures were up 90 cents to $57.25/bbl at around 8:40 a.m. ET, while December RBOB gasoline was up about 1.3 cents to $1.6389/gal.