Following a sharp sell-off to open the week, natural gas futures were trading several cents higher early Tuesday as overnight weather data increased heating demand expectations for later this month. The December Nymex contract was trading 3.3 cents higher at $2.670/MMBtu at around 8:30 a.m. ET.
Weather models overnight added several heating degree days back to the outlook for next Monday through Nov. 25, according to NatGasWeather.
Even so, “the pattern still isn’t nearly cold enough to intimidate,” the forecaster said. Coming off recent losses, the market might “want a few cents back today” based on the added demand, “but to be considered bullish, the frigid Arctic cold pool would need to return into the northern U.S. after retreating into Canada late this weekend, which still isn’t expected.”
Maxar’s Weather Desk highlighted a “marginal cold change” made to its latest six to 10 day forecast, from Sunday through Nov. 21. The colder adjustment was “associated with an early wedge of high pressure and less warming during the second half.
“...Like in the previous outlook, the period features changing conditions, with early belows and much belows in the Eastern Half giving way to more seasonal-like and slightly above normal temperatures in the mid to late period.”
Further out in the 11-15 day outlook, Maxar noted colder changes compared to Monday’s outlook, but the forecaster cautioned that “confidence remains lower than usual” for this period.
“Temperatures are forecast within just a couple degrees from normal in the Midwest, South and East,” Maxar said.
Looking ahead to this week’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 3 Bcf withdrawal for the week ended Nov. 8. Coal generation increased nearly 10 GW week/week in response to the increase in Henry Hub prices during the period, according to the firm.
Owing to a “roaring start” to gas-weighted heating demand this month, Energy Aspects said its balances now indicate a 250 Bcf withdrawal for November, versus 40-50 Bcf based on 10-year normal weather.
“Taken over the course of the full heating season, that change versus normal will result in a striking 1.7 Bcf/d of weather-aided demand,” the firm said. “However, this difference is not enough to hit the reset button on balances just yet.
“...Aside from weather, production growth remains the elephant in the room. The most recent EIA Natural Gas Monthly data confirm a whopping 2.4 Bcf/d month/month increase in August output. Flow data for October point to a still-very-high 1.4 Bcf/d month/month increase. Production has been running higher than expectations and could still continue to do so this month, although we are flagging possible weather-related disruptions.”
December crude oil futures were trading at $57.07/bbl, up 21 cents, as of 8:30 a.m. ET, while December RBOB gasoline was trading fractionally higher at $1.6121/gal.