Natural gas futures were trading sharply lower early Monday as warmer-trending weekend forecasts and comfortable supply levels pressured prices. The December Nymex contract was down 13.6 cents to $2.653/MMBtu shortly after 8:40 a.m. ET.
Heading into Monday’s trading, both the American and European models had shifted warmer by several gas-weighted degree days (GWDD) compared to Friday’s outlook, according to Bespoke Weather Services.
“The warmer changes take place after this week, which remains very strongly cold, with a couple of days near daily record GWDD levels,” the forecaster said. “Guidance has sped up the changes on the Pacific side of the pattern, eliminating the strong ridge over Alaska, cutting off the flow of Arctic air southward into the United States.”
Modeling suggests more ridging could build over Greenland, however, which would “keep an upper level trough in the eastern half of the nation into Thanksgiving week, but without true Arctic air.”
Meanwhile, production set a new all-time high over the weekend at over 95 Bcf/d, putting more pressure on weather-driven demand to soak up the supply, according to Bespoke.
“The market is simply showing yet again that we must have strong demand/cold in order to stay at the levels seen last week,” Bespoke said.
The chilly temperatures this month might offer bulls their “best shot” at pushing prices above $3 this winter, according to analysts at EBW Analytics Group.
“So far, though, it looks like this effort will fail,” the EBW analysts said.
Despite well below-normal temperatures in the near-term, a storage supply cushion and surging production have limited upside for prices, they said.
“With temperatures expected to return to seasonal norms in another week and weather modeling runs trending milder over the weekend,” prices have already started to “plunge” heading into Monday’s trading, according to EBW. Prices “could crumble if temperatures moderate further in early December, as we expect to occur.”
Looking ahead to this week’s Energy Information Administration (EIA) storage report, preliminary estimates submitted to The Desk’s Early View survey suggest it will be a close call as to whether the market sees one more net weekly injection. Responses to The Desk’s survey ranged from a withdrawal of 5 Bcf up to an injection of 9 Bcf, with the average of 18 predictions landing on plus 2.6 Bcf for the week ended Nov. 8.
Last year, EIA recorded a 42 Bcf injection for the period, and the five-year average is a build of 30 Bcf.
December crude oil futures were trading 52 cents lower at $56.72/bbl shortly after 8:40 a.m. ET, while December RBOB gasoline was trading fractionally lower at $1.6257/gal.