Natural gas futures were trading several cents lower early Friday on major warmer trends in the latest weather data. The February Nymex contract was down 4.4 cents to $2.033/MMBtu at around 8:40 a.m. ET.
The latest data from all major weather models heading into Friday’s trading advertised “large warmer revisions” to the outlook, lessening the amount of cold air making its way into the United States during the final third of January, according to Bespoke Weather Services.
“We were concerned about warmer risks given the look of the upper air pattern in the higher latitudes, but the magnitude of today’s change is quite extreme for just a 24-hour period,” Bespoke said. “It now appears that any below normal temperatures for more than a day or two here and there will be confined mostly to the southwestern quadrant of the nation, with the Midwest to Northeast tending to stay warmer than normal.
“...The projected pattern in the 11-15 day would suggest that not much changes into early February, with warmer risks in the northern half of the U.S.”
The weather outlook remained bearish early Friday, but there are signs of tightening in the supply/demand balance, according to analysts.
The Energy Information Administration (EIA) on Thursday reported a surprisingly robust 109 Bcf withdrawal from U.S. natural gas stocks for the week ended Jan. 10, lighter than the five-year average 184 Bcf but easily outpacing the 82 Bcf pull recorded in the year-ago period. Total Lower 48 working gas in underground storage stood at 3,039 Bcf as of Jan. 10, 494 Bcf (19.4%) higher than last year and 149 Bcf (5.2%) higher than the five-year average, according to EIA.
Genscape Inc. analysts said the 109 Bcf pull is in line with the five-year average when compared to degree days and normal seasonality.
“While the vast majority of stats the past year or so have been loose, three of the last five weeks have been close to normal versus weather and seasonality,” according to the firm.
Analysts at Tudor, Pickering, Holt & Co. (TPH) said recent data suggests U.S. production may “finally have cracked.” Northeast production has trended lower over the past three weeks, helping drop total U.S. output to an average 95.5 Bcf/d over the past week, versus highs around 97 Bcf/d in late November, according to TPH estimates.
“Despite early signs of production roll-offs, weather continues to underwhelm, strengthening our conviction that spot pricing will dip below the $2/MMBtu mark, which appears likely to occur prior to injection season,” the TPH analysts said. “On a weather-adjusted basis, the larger-than-expected withdrawal implies a 2.5 Bcf/d undersupplied market, but we expect a correction back to oversupply in the coming weeks.”
February crude oil futures were trading 25 cents higher at $58.77/bbl at around 8:40 a.m. ET, while February RBOB gasoline was trading fractionally higher at $1.6595/gal.