As traders looked ahead to the latest round of government inventory data, and as analysts noted signs of production recovering following declines earlier this week, natural gas futures were down sharply in early trading Thursday. The December Nymex contract was off 9.7 cents to $3.194/MMBtu at around 8:50 a.m. ET.
Predictions for the Energy Information Administration’s (EIA) 10:30 a.m. ET storage report have been pointing to a lighter-than-average build for the week ending Oct. 23.
A Bloomberg survey of six analysts showed injection estimates ranging from 17 Bcf to 39 Bcf, with a median of 37 Bcf. Reuters polled 16 analysts, whose estimates ranged from increases of 17 Bcf to 46 Bcf, with a median injection of 38 Bcf. NGI projected a 42 Bcf injection.
Last year, EIA recorded an 89 Bcf injection for the similar week, and the five-year average is a 67 Bcf build.
“It was colder than normal over the Midwest but warmer than normal over the rest of the U.S.” during the current EIA report period, forecaster NatGasWeather said. “We expect a build of 37-38 Bcf, neutral to a touch bearish versus expectations.”
Meanwhile, after making landfall along the northern Gulf Coast Wednesday, former Hurricane Zeta, now a tropical storm, continued to produce damaging winds of up to 60 mph over parts of the Southeast early Thursday, according to the National Hurricane Center.
“Hurricane Zeta made landfall last evening over Louisiana and is currently merging with a weather system tracking out of the Southern Plains to produce widespread rains over much of the east-central and eastern U.S.,” NatGasWeather said.
While Zeta has resulted in lost cooling demand, Gulf of Mexico (GOM) production shut-ins, power outages and local flooding, the storm appears to have had little impact on liquefied natural gas (LNG) demand, according to NatGasWeather.
Lower 48 dry gas production has declined this week ahead of Zeta’s arrival. However, “today’s numbers show that it may be recovering already, pending revisions,” Genscape Inc. analyst Josh Garcia told clients early Thursday.
The firm estimated a 1.4 Bcf/d increase in production for Thursday, up to 84.9 Bcf/d. That’s after output had fallen 3.2 Bcf/d versus production levels at 86.7 Bcf/d on Monday. In addition to shut-ins in the GOM, Genscape estimated output declines this week in Texas, the Midcontinent and the New Mexico portion of the Permian Basin.
“Gains today were centered in Texas (up 587 MMcf/d) and in the Permian New Mexico (up 787 MMcf/d),” Garcia said. “Gulf production is still depressed due to the hurricane, sitting at 148 MMcf/d today…One place where production has not been hampered is the East, where it has been rising since early October due to stronger local economics.”
Genscape estimated East region production at 32.9 Bcf/d for Thursday, up from the month-to-date average of 31.9 Bcf/d.
As for the overnight weather data, NatGasWeather noted heating demand losses over the previous 24 hours from both the American and European datasets.
Both models “held a rather bearish U.S. pattern for Nov. 4-11 but continued to tease colder air into the West and Plains Nov. 9-12,” the forecaster said. However, projections show this cold “failing to advance into the more important eastern half of the U.S. This needs close monitoring, as the supply/demand balance has become rather bullish, especially when weather patterns are cold enough to take advantage.”
December crude oil futures were down $1.85 to $35.54/bbl at around 8:50 a.m. ET, while November RBOB gasoline was off about 3.6 cents to $1.0455/gal.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |