With forecasts continuing to point to a return to more seasonal temperatures and stronger demand by next week, natural gas futures were trading a few cents higher early Tuesday. The February Nymex contract was up 3.6 cents to $2.218/MMBtu shortly after 8:30 a.m. ET.
Overnight guidance maintained the broader theme of a shift to colder temperatures for the final third of January, according to NatGasWeather. Conditions look “not nearly cold enough” through this weekend before the first of two cold shots arrives over the northern and eastern United States starting next week, the forecaster said.
“Overall, a much better pattern Jan. 20-31 compared to the exceptionally bearish pattern of the past three weeks,” NatGasWeather said. “While stronger demand is coming” during this stretch, “it’s difficult to know if the natural gas markets view it as intimidating enough to warrant February 2020 rallying further to convincingly take out $2.20. Today’s trade could be telling.”
Maxar’s Weather Desk highlighted below normal temperatures expected to spread across the eastern half of the Lower 48 for the period from Sunday through Jan. 23.
“Low pressure tracks off the East Coast on Day 6, leading in a colder air mass diving southward from Canada and into the Midcontinent at that time,” the forecaster said. “The colder air mass is represented by high pressure, which should carry below and much below normal temperatures through the Eastern Half during the course of the period.”
Further out in the Jan. 24-28 time frame, Maxar noted warmer changes to its forecast for the Midwest and colder changes for the South.
“Models show good agreement with another push of colder high pressure” into the central Lower 48 around the middle of the period that’s expected to then push “south and eastward from there,” Maxar said. “Prior to this is a brief round of above normal temperatures in Eastern Canada and the Northeast during the early half.”
Meanwhile, looking ahead to this week’s Energy Information Administration (EIA) storage report, Energy Aspects is projecting a return to triple-digit withdrawals, issuing a preliminary estimate for a 106 Bcf pull for the week ending Jan. 10. Colder weather during the period led to increased demand across the residential/commercial (up 3.4 Bcf/d week/week), power (up 3.2 Bcf/d) and industrial (up 1.9 Bcf/d) sectors, according to the firm’s estimates.
“Beyond the milder-than-normal weather over much of the U.S. since the start of the year, strong year/year production growth continues to constrain withdrawals,” Energy Aspects said in a recent note. “Flow data point to Lower 48 output gains of 7.0 Bcf/d year/year to date in January, following 7.2 Bcf/d year/year December 2019 growth.”
February crude oil futures were trading 63 cents higher at $58.71/bbl shortly after 8:30 a.m. ET, while February RBOB gasoline was up about 2.6 cents to $1.6834/gal.