Natural gas futures were in freefall early Thursday as overnight guidance further weakened the amount of potential cold expected to arrive later this month. After dropping 10.0 cents in Wednesday’s trading, the January Nymex contract was down another 16.3 cents to $2.617/MMBtu at around 8:50 a.m. ET.
Coming off of milder trends for the Dec. 12-16 period in the midday model runs Wednesday, the American and European datasets extended warmer trends for this time frame overnight, according to NatGasWeather.
“The weather data was already bearish” for this week through around Dec. 12, making the mid-December time frame “the next best chance for colder systems to finally arrive,” the firm said. “And after backing off further overnight, the natural gas markets are yet again disappointed weather patterns just aren’t as cold as advertised yesterday.”
That colder temperatures toward the middle of the month have failed to materialize as expected has led to “further frustration” in the market, “with winter strip prices in freefall since yesterday morning,” NatGasWeather said.
Analysts at EBW Analytics Group said the drivers behind the recent selling have been partly technical, with weak prices in the physical market and the potential for a bearish surprise from the latest Energy Information Administration (EIA) storage report reinforcing the move.
“The January contract surged early” in Wednesday’s session, the EBW analysts noted. “After resistance held at $2.94, though, it sold off fiercely, breaking support at $2.82 and closing at the next support level down.
“Machine-driven trading played an important role, but so did forecasts for very mild near-term weather, uncertainty about the cold signal on day 15” and predictions showing EIA reporting a small injection in this week’s storage data, the analysts said.
The bearish shift in forecasts overnight “prompted panic-selling,” with current prices “not sustainable,” according to EBW. Still, “with warmer-than-normal weather expected next week, prices may not recover until mid-to-late next week.”
EIA is scheduled to release its latest inventory report at 10:30 a.m. ET. Surveys have been pointing to a wide range of estimates for the print, which will reflect changes in Lower 48 gas stocks during the week ending Nov. 27.
A Bloomberg survey of six analysts produced a range from a 26 Bcf withdrawal to a 1 Bcf injection, with a median draw of 19 Bcf. Reuters polled 16 analysts, whose withdrawal estimates were as low as 28 Bcf and injection estimates were as high as 3 Bcf, with a median decrease of 12 Bcf. A Wall Street Journal poll of 12 analysts showed draws ranging from 8-28 Bcf. NGI projected a 15 Bcf pull.
Last year EIA recorded a 22 Bcf pull for the similar week, and the five-year average stands at a 41 Bcf draw. Total inventories as of Nov. 20 sat at 3,940 Bcf, which is 322 Bcf above year-ago levels and 250 Bcf above the five-year average.
January crude oil futures were off 5 cents to $45.23/bbl at around 8:50 a.m. ET, while January RBOB gasoline was up fractionally to $1.2456/gal.
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