With divergent weather models moving toward a middle ground on the temperature outlook for later this month, natural gas futures were trading close to even early Friday. The December Nymex contract was trading 0.6 cents higher at $2.653/MMBtu shortly after 8:30 a.m. ET.
The major weather models came into better agreement overnight, with the colder American model “showing much less cold” and the European model shifting toward a chillier outlook, according to Bespoke Weather Services.
After the American model had been roughly 30 gas-weighted degree days colder than the European previously, “we felt the answer likely was in the middle, which is now where the model consensus sits,” the forecaster said. “An interesting theme in the modeling is a subtle trend toward more emphasis again on the Pacific side of the pattern as the main driver, and a little less on the Atlantic side.
“This still keeps the late month pattern very tricky, but if blocking winds up weaker on the Atlantic side, the projected shift in tropical forcing might more easily bring about some warming into early December. That is beyond the 15-day modeling, however, so confidence is lower for now.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 3 Bcf injection into U.S. natural gas stocks for the week ended Nov. 8, extending the refill season. The 3 Bcf build was on the higher side of consensus but bullish versus the historical comparisons, as last year EIA recorded a 42 Bcf injection for the period, and the five-year average is a 30 Bcf build.
Total Lower 48 working gas in underground storage stood at 3,732 Bcf as of Nov. 8, 491 Bcf (15.1%) higher than year-ago levels and nearly flat with the five-year average of 3,730 Bcf.
“On a weather-adjusted basis, the market is back in 3 Bcf/d oversupplied territory, where it has been for much of the fall, after a small reprieve last week” when balances came in around 1 Bcf/d oversupplied, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
The withdrawal season is poised to “get started in a big way” with next week’s report, the TPH analysts said. They pointed to early estimates calling for a withdrawal north of 80 Bcf/d based on residential/commercial demand tracking 38% above historical norms amid blasts of cold weather sweeping through the Lower 48 this week.
“Residential/commercial demand for the current week is averaging 38.5 Bcf/d, levels not normally witnessed until late December, and given the significant oversupply in the market, it’s possible next week’s storage print is the largest until Christmas if weather normalizes,” the TPH team said.
Over the past nine weeks, injections have tracked 93 Bcf above the five-year average, but total degree days have exceeded the five-year average by 108 Bcf, Genscape Inc. analysts Eric Fell and Brandon Lee noted following this week’s EIA report. During that time, the market has on average been 4 Bcf/d loose adjusting for weather and seasonality, they said.
December crude oil futures were down 0.5 cents to $56.72/bbl shortly after 8:30 a.m. ET, while December RBOB gasoline was off fractionally to $1.6084/gal.