Natural gas futures retreated early Thursday as one of the major weather models trended warmer, while upcoming government inventory data was expected to take a backseat to forecasts in terms of influencing future price action. The March Nymex contract was down 4.4 cents to $2.658/MMBtu at around 8:45 a.m. ET.
Selling corresponded to changes in the European model overnight, with the model projecting notably less heating demand by showing less cold air reaching eastern portions of the country for the first 10 days of February, according to NatGasWeather.
The American Global Forecast System (GFS) model “is now a bit colder compared to the European for early February and favors several rather impressive cold shots Feb. 6-11,” the firm said. “The European also sees cold shots but mainly over the western and central U.S. This makes today’s midday data important to see if the European flips back colder or if the GFS trends warmer.”
Meanwhile, this week’s U.S. Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET, is expected to show a triple-digit pull, though not as big of a decrease as reported a week earlier.
EIA recorded a pull of 187 Bcf from storage for the week ended Jan. 15, the largest decrease of the season.
For the latest week, a Reuters poll found estimates ranging from withdrawals of 127 Bcf to 145 Bcf, with a median decrease of 138 Bcf. Bloomberg’s survey of analysts landed at a median decrease of 139 Bcf, with estimates ranging from pulls of 131 Bcf to 143 Bcf.
NGI’s model forecasted a 131 Bcf withdrawal. A year earlier, EIA recorded a decrease in inventories of 170 Bcf. The five-year average withdrawal for the comparable week is 174 Bcf.
“It was warmer than normal over most of the U.S.” during the reporting period, NatGasWeather said. “Our algorithm predicts a 137-138 Bcf withdrawal,” but predicting this week’s print is “tricky” because of the potential impacts from the Martin Luther King Jr. Day holiday.
Early Thursday, following the lost demand projected by the European model, markets were showing signs of reacting “cautiously” to a forecast that remains cold enough to drive “large draws for three straight weeks,” analysts at EBW Analytics Group said.
“Very cold weather in days one to three and 11 to 15 could also cause freeze-offs, reducing production and further increasing draws,” the analysts said.
As for the upcoming EIA storage report, “many analysts favor a slightly smaller pull. Absent a major surprise, though, futures are likely to be driven more by midday model runs than by a small deviation” in the storage report compared to survey predictions, they said.
March crude oil futures were up 36 cents to $53.21/bbl at around 8:45 a.m. ET, while February RBOB gasoline was up about 1.6 cents to $1.5933/gal.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |