Weighed down by the prospect of warmer-than-normal conditions stretching further into the month of January, natural gas futures were trading several cents lower early Thursday. The January Nymex contract was down 4.5 cents to $2.241/MMBtu as of 8:30 a.m. ET.
Guidance remained mostly unchanged overnight in terms of expected demand between now and the start of the new year, according to Bespoke Weather Services.
However, “models have turned less threatening as far as cold potential is concerned in early January,” the forecaster said. “We expected that this would be the risk, as the Pacific pattern and its positive Eastern Pacific Oscillation configuration is in no big hurry to break down. This increases the risk of a warmer eastern U.S. into the first week of January.
“We do still see reasons to think the pattern can finally head back colder beyond that point based on tropical forcing cycles, but patience is required,” according to Bespoke. Once stronger cold does return “it is more likely, at least initially, to dump into areas from the Plains into the West, limiting impact in key areas for natural gas consumption.”
Already facing an “unbroken string” of warmer-than-normal temperatures forecast to stretch from this weekend through Jan. 2, natural gas bulls may not have much to look forward to beyond that point, according to analysts at EBW Analytics Group.
“The odds of warming weather extending further into January have reached 76%, sending gas prices lower in early trading this morning,” the EBW analysts said.
Meanwhile, the Energy Information Administration (EIA) is scheduled to release its weekly storage report at 10:30 a.m. ET. Estimates have been pointing to a somewhat lighter-than-average pull in the low 90s Bcf for this week’s report, which covers the period ended Dec. 13.
A Reuters poll of 16 analysts estimated withdrawals ranging from 68 Bcf to 102 Bcf, with a median draw of 92 Bcf. NGI’s model predicted a draw of 86 Bcf.
EIA recorded a 132 Bcf withdrawal in the year-ago period, and the five-year average is a 112 Bcf draw. Inventories as of Dec. 6 stood at 3,518 Bcf, 593 Bcf above last year and 14 Bcf below the five-year average, according to EIA.
“Several well-regarded analysts predict an even larger draw (potentially reaching 100 Bcf), which could result in a brief upward tick,” EBW analysts said. “Even if this occurs, though, support at $2.20 could be tested as early as tomorrow, with even lower prices before Christmas.”
At around 8:30 a.m. ET, January crude oil was off 14 cents to $60.79/bbl, while January RBOB gasoline was trading fractionally higher at $1.6871/gal.