Mixed trends in the latest guidance, but with models “backing off” on the amount of colder temperatures expected into the second week of February, had natural gas futures trading close to even early Tuesday. The February Nymex contract was trading 1.3 cents higher at $1.915/MMBtu at around 8:30 a.m. ET.
Overnight trends were mixed in the major weather models, with the Global Forecast System dropping demand from the outlook and the European model adding a “minor” amount of heating demand in its latest run, according to NatGasWeather.
“Overall, the pattern is still not cold enough through Feb. 4,” the forecaster said. “...But what was most important was how much cold air the weather data would show pushing into the northern U.S. Feb. 5-9.” After teasing “a decent amount” of cold in runs late last week and over the weekend, models “reversed milder Monday and overnight.
“So here we are yet again with weather data backing off on the amount of cold into the U.S. and disappointing the natural gas markets even though the supply/demand balance continues to tighten.”
Even a sustained stretch of colder than normal temperatures beyond the first week of February could have a limited demand impact, Energy Aspects analysts said in a recent note to clients.
“We ran our models assuming 5% and 10% colder-than-normal weather from Feb. 7 through the end of February,” they said. “Under the 10% colder-than-normal scenario, our balances indicate an additional 135 Bcf of residential/commercial, industrial heating and power load demand. Under the 5% colder-than-normal scenario, the number is closer to 75 Bcf.
“With all else being equal, even the overtly bullish 10% scenario would still leave our end-March inventory just above 1.7 Tcf,” the Energy Aspects analysts said. “While such cold would likely also spur more production freeze-offs, the end-season carryout would still not have been reduced enough to fundamentally change the landscape heading into the injection season.”
Meanwhile, liquefied natural gas (LNG) feed gas demand continues to climb to new heights. Genscape Inc.’s latest estimates showed pipeline deliveries to export terminals setting a new daily record high Tuesday, with aggregate nominations just under 9.13 Bcf/d.
“Recent days’ volumes have been somewhat volatile with operational upsets at Sabine Pass, but the ramp in operations at Freeport that began mid-month along with a recovery in deliveries to Cameron have boosted the top-day number,” Genscape senior natural gas analyst Rick Margolin said.
“Month-to-date aggregate deliveries are now averaging 8.1 Bcf/d, which is just about 0.15 Bcf/d below” the firm’s supply and demand forecast heading into the month, the analyst said.
March crude oil futures were trading 28 cents higher at $53.42/bbl at around 8:30 a.m. ET, while February RBOB gasoline was up about 1.7 cents to $1.5014/gal.