Natural gas futures pared some of their recent gains in early trading Wednesday as forecasts continued to show unseasonable cold through the middle of the month. The June Nymex contract was down 8.6 cents to $2.048/MMBtu at around 8:45 a.m. ET.

Morning Markets Coverage

The latest forecast from Bespoke Weather Services underwent only minor changes ahead of Wednesday’s session.

“We did see a bit of a warmer change” in the European model that lowered heating demand in the East, while the American dataset was steady, Bespoke said. “The two models are in very good agreement regarding total forecast demand over the next 15 days.

“Cold weather, relative to the time of year, remains the lead story in the near term, with a couple of record” daily gas-weighted degree day totals “possible over the next week or so, peaking this weekend. Strongest chill versus normal lies in the Midwest to East.”

The higher demand in the East is helping to absorb the production displaced by the explosion reported Monday on the Texas Eastern Transmission (Tetco) system in Kentucky, according to Genscape Inc. analyst Josh Garcia.

“Current forecasts show an average of 6.2 degree days over the next 10 days in the East, roughly double the 30-year average around this time of year,” Garcia said. “Tetco M-3 was unconstrained at the time of the explosion, with flows on Delmont and Bedford rising 1.2 Bcf/d collectively since the May explosion. Demand in the East has risen 8.59 Bcf/d since last Saturday (May 2) to 25.8 Bcf/d and is expected to peak at 27.5 Bcf/d this Saturday (May 9).”

Meanwhile, looking ahead to Thursday’s Energy Information Administration (EIA) storage report, the first triple-digit injection of 2020 could be in store. Energy Aspects issued a preliminary estimate for a 109 Bcf injection for the week ending May 1.

“Our flow data indicate that production will have dropped by just over 1 Bcf/d week/week, but this will not be enough to offset a 6 Bcf/d or so drop in residential/commercial demand, with an additional 0.7 Bcf/d week/week loss” in liquefied natural gas feed gas demand, Energy Aspects said.

“Our weekly balances are indicating a string of triple-digit injections will take place all throughout May. Although that signals bearish fundamentals, it is clear that the market has been trying to price in two opposing dynamics: expected deep sequential declines in associated production versus demand bearing the marks of disruptions from Covid-19 — whether that be in the domestic market or exports.”

Analysts at EBW Analytics Group are also projecting the season’s first triple-digit injection for this week’s report.

June crude oil futures were off $1.63 to $22.93/bbl at around 8:45 a.m. ET, while June RBOB gasoline was down about 2.0 cents to around 88.2 cents/gal.