In a sharp reversal from gains recorded the previous session, natural gas futures were trading lower early Friday amid demand losses in the latest guidance. The expiring January Nymex contract was down 7.9 cents to $2.215/MMBtu at around 8:30 a.m. ET, while February was trading 6.8 cents lower at $2.217.
Both the Global Forecast System (GFS) and European weather models lost demand overnight, particularly the “much milder trending” European dataset, according to NatGasWeather.
“Weather trends were quite bearish overnight in the European model,” the forecaster said. “The GFS also lost demand but was still rather chilly Jan. 6-8. But after the GFS has performed so poorly, we mentioned colder patterns were only to be believed if the European model was also on board, and now it isn’t.”
Traders Friday will also be factoring in the latest Energy Information Administration (EIA) inventory data. Estimates ahead of this week’s EIA storage report, pushed back to 10:30 a.m. ET Friday because of the Christmas Day holiday, have been pointing to a withdrawal in the upper 140s Bcf.
A preliminary Bloomberg survey, which showed withdrawals ranging from 139 Bcf to 155 Bcf, had a median estimate of 147 Bcf. A Reuters poll of 12 analysts estimated draws ranging from 136 Bcf to 164 Bcf, with a median of 148 Bcf. NGI projected a 158 Bcf pull.
“It was warmer than normal over much of the western and southern U.S., while colder than normal over the Midwest and portions of the Northeast” during this week’s EIA report period, NatGasWeather said. “Our algorithm expects a 156 Bcf withdrawal, a touch to the bullish side.”
Last year, the EIA recorded a 61 Bcf withdrawal for the similar week, while the five-year average withdrawal sits at 101 Bcf. Inventories as of Dec. 13 stood at 3,411 Bcf, 618 Bcf above year-ago levels and 9 Bcf below the five-year average.
Meanwhile, looking at the latest supply picture, Genscape Inc.’s estimate for Lower 48 production as of early Friday showed a “sizable” 0.8 Bcf/d decline day/day, although the firm cautioned that because of “questionable pipeline reporting” this number could undergo revision.
“Our top-day estimate based on pipeline nominations is indicating East production is down 0.24 Bcf/d day/day, led by a 0.16 Bcf/d drop out of Northeast Pennsylvania,” Genscape senior natural gas analyst Rick Margolin said. “Midcontinent production is down about 0.18 Bcf/d, and Texas looks to be down 0.1 Bcf/d day/day.”
“Elsewhere, there is the chance for more cold-weather-related production disruptions in the Rockies with another cold front making its way toward the region,” Margolin said, pointing to warnings of potential strained operating conditions posted by Colorado Interstate Gas and Wyoming Interstate Company.
At around 8:40 a.m. ET Friday, February crude oil futures were trading close to even at $61.76/bbl, while January RBOB gasoline was trading fractionally lower at $1.7530/gal.