A mixed outlook from the overnight weather models saw natural gas futures trading several cents lower early Friday, while analysts continued to find evidence of oversupply in the latest inventory data. The January Nymex contract was down 4.1 cents to $2.386/MMBtu shortly after 8:40 a.m. ET.
The latest guidance heading into Friday’s trading offered a “somewhat mixed message,” according to Bespoke Weather Services. This was partly due to the “continuation of a massive gap” between the major models in terms of expected demand, with the American dataset remaining significantly colder.
Also keeping the outlook mixed, both the European and American models “show a pattern at the end of the 11-15 day that is less favorable for cold,” Bespoke said. “This weaker ending of the runs appears to be what the market is taking note of this morning, but we still have midday runs yet to go to shape sentiment heading into the weekend.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 19 Bcf withdrawal from U.S. gas stocks for the week ending Nov. 29, within the range of projections but far below the 62 Bcf withdrawal recorded last year and the five-year average 42 Bcf pull. Total working gas in storage as of Nov. 29 stood at 3,591 Bcf, 591 Bcf above year-ago levels and 9 Bcf below the five-year average, according to EIA.
Balancing the natural gas market will require supply declines, according to Tudor, Pickering, Holt & Co. (TPH) analysts.
“The task will be made much easier if we see no further production growth into year-end, but the trend is not our friend as dry gas production averaged about 96 Bcf/d last week, up about 3 Bcf/d over the last 10 weeks,” the TPH team said. “As a result, the oversupply has become more acute, and on a weather-adjusted basis, yesterday’s reported 19 Bcf draw implies an oversupply of 4.5 Bcf/d.”
This comes even as the weather has contributed 13% more degree days versus the five-year average during the withdrawal season so far, TPH estimates show.
“Also supporting the demand picture is an increasing pull” from the Cameron liquefied natural gas terminal, “which hit a record high of 0.8 Bcf/d this week as Train 2 reached final commissioning stages with the production of feed gas,” the analysts said.
Raymond James & Associates Inc. analysts viewed the 19 Bcf pull as implying a 1.29 Bcf/d looser balance versus the same week last year. Over the past four weeks, balances have averaged 0.03 Bcf/d looser year/year, they said.
January crude oil futures were off 58 cents to $57.85/bbl shortly after 8:40 a.m. ET, while January RBOB gasoline was off fractionally to $1.6173/gal.