A large milder shift in one of the major weather models overnight sent natural gas futures tumbling heading into Thursday’s trading. Entering its first session as the front month, the April Nymex contract was down 6.4 cents to $1.773/MMBtu at around 8:40 a.m. ET.
The European model underwent “big milder trends” overnight, shedding 17 heating degree days (HDD) compared to its Wednesday afternoon run and 27 HDD versus 24 hours prior, according to NatGasWeather.
The model showed “not nearly as much cold air into the northern U.S. March 5-8 by seeing a weather system over Southern Canada only providing a minor glancing blow,” the forecaster said. Based on the warmer shift overnight, “the natural gas markets are going to view weather patterns as being warm/bearish after the current cold shot sweeping across the northern and eastern U.S. exits Saturday.”
Meanwhile, the Energy Information Administration (EIA) is scheduled to release its weekly storage report at 10:30 a.m. ET, with analysts expecting a larger-than-average withdrawal for the week ending Feb. 21.
A Bloomberg survey of 11 analysts showed withdrawals ranging from 145 Bcf to 165 Bcf, with a median of 156 Bcf. Polls by the Wall Street Journal and Reuters produced similar results, while NGI’s model projected a pull of 152 Bcf.
The EIA recorded a 167 Bcf draw for the similar week last year, while the five-year average withdrawal stands at 122 Bcf. As of Feb. 14, Lower 48 stocks stood at 2,343 Bcf, 613 above the year-ago level and 200 Bcf above the five-year average.
“It was colder than normal over most of the northern half of the U.S. while warmer than normal across the southern half,” NatGasWeather said of this week’s EIA report period. “Our algorithm favors a draw of 152-153 Bcf, to the slightly bearish side...With prices now back under $1.80 in overnight trade, it will likely take a rather bullish EIA report miss to reclaim it with conviction.”
Looking at the supply picture, Genscape Inc.’s Lower 48 production estimate totaled 92.9 Bcf/d for Thursday. Over the past three weeks, output has hovered within a “fairly tight range” from 92.3 Bcf/d to 93.6 Bcf/d, according to the firm.
“Production month-to-date is now averaging 92.7 Bcf/d,” Genscape senior natural gas analyst Rick Margolin said. “While that is an increase of more than 4.7 Bcf/d from February 2019, it is a drop of about 0.8 Bcf/d from January 2020 and nearly 1.6 Bcf/d below the winter-to-date average headed into this month.”
April crude oil futures were down $1.48 to $47.25/bbl at around 8:40 a.m. ET, while March RBOB gasoline was down about 6.6 cents to $1.3894/gal.