With early June heat disappointing bulls in the latest forecasts, appearing to limit upside for prices in the near-term, natural gas futures pulled back sharply in early trading Friday. The July Nymex contract was down 42.9 cents to $8.466/MMBtu at around 8:50 a.m. ET.
Overnight weather model trends were cooler, leading Bespoke Weather Services to remove four gas-weighted degree days from its latest 15-day forecast.
“We do see total 15-day demand just a bit higher than normal, so it’s not like the pattern is inherently bearish,” Bespoke said. However, “the first third of June definitely is not showing the heat we had expected it to show.”
Meanwhile, Bespoke said its dataset was showing a new year-to-date high for production Friday, with volumes closing in on 97 Bcf/d.
“This likely gives the market a sense that we have seen the most bullish data we will see, hence a good deal of profit taking by longs in the market,” Bespoke said. “Still, the overall picture remains supportive, in our view, as data being less bullish versus the last several days is not saying much given where end-of-season storage levels are projected to be.”
The Energy Information Administration (EIA) on Thursday reported an 80 Bcf injection into U.S. natural gas storage for the week ended May 20, on the leaner side of market expectations. The build left stockpiles at 1,812 Bcf, or 327 Bcf (minus 15.3%) below the five-year average, according to EIA.
“Compared to degree days and normal seasonality, this week’s report appears tight by 4 Bcf/d versus the prior five-year average,” Wood Mackenzie analyst Eric Fell said in a note to clients Friday. This makes the latest EIA print “one of the tightest weekly storage reports this year.”
Tudor, Pickering, Holt & Co. estimated the market was roughly 1 Bcf/d undersupplied during the EIA report week on a weather-adjusted basis, versus 4 Bcf/d oversupplied in the week-earlier period.
“As warmer temperatures kick power generation demand into high gear, supply remains a key focal point, with volumes retracing toward around 94 Bcf/d in recent days after a sustained run in the 95 Bcf/d range over the last three weeks,” the TPH analysts said.
Output from the Permian Basin was seen trending lower recently, down to 13.3 Bcf/d late in the week versus an average of 14.1 Bcf/d in the prior week, according to the firm.
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