Colder overnight trends for late April from one of the major weather models saw natural gas futures climb several cents in early trading Friday. The May Nymex contract was up 3.1 cents to $2.689/MMBtu at around 8:50 a.m. ET.
The European weather model added 12 heating degree days (HDD) overnight, with colder trends impacting the northern United States early next week through April 26, according to NatGasWeather.
For the last ten days of April the European model is now colder than its American counterpart by close to 20 HDD, and the divergence between the models will need to be resolved, the firm said.
“With the overnight European data trending notably colder over the past 24 hours, we look to see if this leads to further buying ahead of the weekend break and whether May 2021 prices can take out $2.70,” NatGasWeather said.
Meanwhile, the U.S. Energy Information Administration (EIA) on Thursday reported an injection of 61 Bcf into Lower 48 natural gas storage. The print was below median estimates found by major polls and the year-earlier injection of 68 Bcf. The latest build lifted inventories to 1,845 Bcf, below the year-earlier level of 2,087 Bcf and roughly in line with the five-year average of 1,834 Bcf.
“Compared to gas-weighted degree days and normal seasonality, this week’s reported withdrawal appears tight by around 2 Bcf/d versus the five-year average,” Wood Mackenzie analyst Eric Fell said of this week’s EIA print.
Prior to the report, Wood Mackenzie had been looking for a 75 Bcf injection for the week, and there’s no standout explanation for the deviation between the firm’s supply and demand modeling and the latest EIA print, according to Fell.
“Over the last 12 weeks, the average error of our supply and demand model versus the weekly EIA storage report has been very close to zero, but five weeks of those 12 weeks have had larger than normal errors (more than 10 Bcf), with three upside misses and two downside misses,” the analyst said. “Supply and demand models based on daily pipeline data have become more difficult with record amounts of production and demand behind intrastate pipelines.”
Analysts at Tudor, Pickering, Holt & Co. (TPH) came away from this week’s EIA report focused on exports, which they said are outperforming expectations as production has pulled back.
“Despite warm weather driving a much larger than normal injection, it’s hard not to like the rate of change on the gas macro, as exports are materially outperforming our expectations while supply retreats from recent highs,” the TPH analysts said.
Degree days during this week’s EIA report period came in 22% below the five-year average, according to TPH.
“However, with forecasts turning cooler and exports running hot we’re expecting some tight prints to close out April,” the TPH team said.
TPH estimates show recent liquefied natural gas feed gas demand running above 11 Bcf/d, with exports to Mexico topping 7 Bcf/d, up from a high of 6.4 Bcf/d last summer even as April is typically a low demand month.
May crude oil futures were up 12 cents to $63.58/bbl at around 8:50 a.m. ET, while May RBOB gasoline was trading fractionally higher at $2.0598/gal.
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