Natural gas futures were trading slightly lower early Monday as the latest guidance pointed to a short-lived cold blast starting around the second week of January amid an otherwise warmer pattern. The February Nymex contract was off 1.4 cents to $2.217/MMBtu shortly after 8:40 a.m. ET.
Models trended colder over the weekend, according to Bespoke Weather Services, but the forecaster said it didn’t view the changes as bullish.
Both the American and European models “suggest there is nothing more than a three day colder window around Jan. 7-9 as a piece of Canadian cold moves through the Midwest and East, only to be followed by another potentially significant warmer shift as the next upper level trough dumps into the western half of the nation, amplifying a warmer ridge again farther east,” Bespoke said.
“We still see no change in the higher latitude pattern that suggests a material colder shift can occur anytime soon for key natural gas consuming regions. We can get an occasional colder day, but the base state of the pattern favors warmer overall, outside of the western states.”
Meanwhile, the Energy Information Administration (EIA) on Friday reported a massive 161 Bcf pull from inventories for the week ending Dec. 20. Estimates had ranged widely but generally clustered around a withdrawal in the upper 140s Bcf. Last year, the EIA recorded a 61 Bcf withdrawal for the similar week, while the five-year average withdrawal stood at 101 Bcf.
Total working gas in storage as of Dec. 20 stood at 3,250 Bcf, 518 Bcf higher than last year at this time and 69 Bcf below the five-year average, according to EIA.
“It was another strong week of weather demand, as degree days outpaced norms by 19%, but on a weather-adjusted basis the print remains bullish, indicating a 2 Bcf/d undersupplied market based on historical degree day correlations,” analysts at Tudor, Pickering, Holt & Co. (TPH) said of Friday’s EIA report.
“Despite the historical correlations suggesting an undersupplied market, our supply/demand balances suggest the market remains oversupplied by about 2 Bcf/d through 1Q2020, and we expect inventories to grow versus the five-year average from minus 3% now to plus 15% by the end of the withdrawal season.”
Looking at the supply picture, Genscape Inc.’s estimates showed Lower 48 production down slightly to average 94.13 Bcf/d over the weekend, about 0.43 Bcf/d below the prior seven-day average. The firm observed 0.3 Bcf/d of declines in Texas, with both the New Mexico Permian and Northern Louisiana showing declines of 0.11 Bcf/d.
“Production volumes should, however, recover this week as there are very few planned maintenance events, and weather in freeze-prone areas is forecast to be mild,” Genscape senior natural gas analyst Rick Margolin said.
February crude oil futures were trading 36 cents higher at $62.08/bbl shortly after 8:40 a.m. ET, while January RBOB gasoline was trading fractionally higher at $1.7548/gal.