Against the backdrop of a tight supply/demand balance, a colder-trending temperature outlook for later this month helped lift natural gas futures several cents in early trading Friday. The November Nymex contract was up 5.1 cents to $2.826/MMBtu at around 8:40 a.m. ET.
The latest forecast early Friday from Bespoke Weather Services shifted colder toward the end of the month, in the 11-15 day time frame.
“The forecast remains a tricky one, as we have plenty of cold air on the maps from Western Canada down into the Rockies and Plains, but the issue is how much of this can spill farther east and south into areas more crucial for natural gas demand,” Bespoke said. “This is where models have been going back and forth the last few days,” with recent model runs “suggesting more eastward expansion of the colder anomalies.”
Meanwhile, the firm’s estimates showed liquefied natural gas feed gas demand climbing to 8.15 Bcf/d early Friday.
“Power burns remain strong, with the big test there coming now as southern heat fades away,” Bespoke said. “Either way,” Thursday’s Energy Information Administration (EIA) storage report “confirms that supply/demand balances are very tight.”
The EIA reported a 46 Bcf injection into U.S. gas stocks for the week ending Oct. 9, a print that came in around 10 Bcf below consensus. The reported 46 Bcf injection was dwarfed by last year’s 102 Bcf build and the 87 Bcf five-year average. Total working gas in storage as of Oct. 9 stood at 3,877 Bcf, which is 388 Bcf higher than year-ago levels and 353 Bcf above the five-year average, EIA said.
For the most recent EIA report week analysts at Tudor, Pickering, Holt & Co. (TPH) estimated a 3.8 Bcf/d undersupplied market on a seasonally adjusted basis.
“If seasonal weather patterns hold, next week should represent trough demand, as the gains in residential/commercial more than offset the losses on power generation,” the TPH analysts noted.
This comes as the first weekly net withdrawal of the season is just around the corner, potentially as early as the first week of November.
“As we prep for withdrawal season, we’re forecasting 660 Bcf of draws through year-end 2020 versus norms of around 525 Bcf, and for the withdrawal season as a whole, we’re forecasting cumulative draws of around 2,300 Bcf versus norms of around 2,000 Bcf,” the TPH team said.
Looking at the LNG outlook, with a sunken barge continuing to obstruct traffic through the Calcasieu Ship Channel, the Cameron LNG terminal could see impacts to its liquefaction operations over the weekend, according to Genscape Inc.
The sunken barge has been “effectively ceasing LNG traffic to Cameron LNG,” Genscape analyst Amir Rejvani said. “…Given the current rate of liquefaction, Cameron LNG will need to shut down or decrease operations significantly over the weekend in order to not reach local LNG tank capacity.”
November crude oil futures were off 28 cents to $40.68/bbl at around 8:40 a.m. ET, while November RBOB gasoline was down about 1.5 cents to $1.1646/gal.
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