Against a bullish backdrop of underperforming domestic production, a glimpse of summer temperatures in updated forecasts spurred natural gas futures sharply higher in early trading Tuesday. After picking up 23.1 cents in the previous session, the June Nymex contract was up 44.7 cents to $7.922/MMBtu at around 8:50 a.m. ET.
A combination of technical momentum and heat in the forecast was setting the stage for natural gas prices to once again challenge the $8 mark early Tuesday, according to EBW Analytics Group senior analyst Eli Rubin.
Amid ongoing supply adequacy concerns during the refill season, the latest production estimates continued to show “subdued” output on a combination of lingering weather-related impacts in the Rockies, Appalachian maintenance and “phantom first-of-month declines in pipeline nominations,” according to the analyst.
“While production is likely to move higher over the next seven to 10 days, low supply readings provide a constructive near-term backdrop,” Rubin said.
Liquefied natural gas feed gas nominations could also trend higher following resolution of maintenance at the Freeport and Cameron terminals, but the emergence of early-season heat was “the principal bullish driver” for prices as of early Tuesday, the analyst said.
Both the American and European weather models increased demand expectations overnight on a combination of hotter and cooler trends over the next 10 days, according to NatGasWeather.
Forecasts advertised “a taste of early summer heat this weekend over Texas and the Southern Plains, where highs will reach the 90s to near 100 degrees,” the firm said. “It’s a bit too early in the season for impressive heat to drive strong cooling demand. However, with tight U.S. supplies, any threat of early season heat could provide strength.”
Further out in the forecast period, models showed a “bearish setup” for the May 12-18 time frame, when it’s expected that “cooler than normal weather systems return across the northern and central U.S., while coverage of 90s decreases across the southern U.S.,” NatGasWeather added.
The firm said it would anticipate $8-plus prices “sooner than later” absent signs of increasing U.S. production.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |