Supported by warmer weather trends and a modest recovery in export demand after flows reached new lows over the Memorial Day weekend, natural gas futures were up several cents in early trading Tuesday.
The soon-to-expire June Nymex contract was up 5.9 cents to $1.790/MMBtu at around 8:40 a.m. ET. The July contract was trading around $1.938, up 5.7 cents.
Forecasts over the weekend showed a net increase in expected weather-driven demand into June based on warmer overall trends, according to Bespoke Weather Services.
“Strongest warm changes are in the central U.S., as we do have a weak cool trough that clips the East with some cooler weather at the very beginning of June,” Bespoke said. “We see a little more warmth in parts of the South as we get into the 11-15 day time frame,” which keeps forecast cooling degree days at above-normal levels.
“This generally fits with our expectations of an above-normal demand pattern for June, but not extreme, as we do not yet see the shift in global angular momentum into a La Nina state, something which likely comes later this summer, adding hotter risks.”
Looking at balances, feed gas deliveries to U.S. liquefied natural gas (LNG) facilities fell to a new monthly low of 5.35 Bcf/d on Sunday amid downward pressure from “unfavorable LNG export economics,” according to estimates from Genscape Inc.
“Sunday’s low represents a decline of 43% from the maximum daily feed gas deliveries observed during the peak of demand this winter,” Genscape analyst Preston Fussee-Durham said in a note to clients. “…However, based on timely cycle for today’s gas day, May 26, LNG feed gas deliveries have shown a slight recovery, up nearly 680 MMcf/d from Sunday’s lows and nearing the prior two-week high of 6.06 Bcf/d.
“As expected, this reversal has been led by some of the largest consumers of feed gas — Cameron LNG (up 0.36 Bcf/d), Corpus Christi LNG (up 0.17 Bcf/d) and Sabine Pass (up 0.24 Bcf/d). However, Cameron’s gains come after a near week-long decline, from highs of 1.65 Bcf/d to Sunday’s low of 0.86 Bcf/d.”
On the supply side, flow data show U.S. natural gas supply increased by 1 Bcf/d over the long holiday weekend, according to analysts at Tudor, Pickering, Holt & Co. (TPH). The increase was “entirely driven by Texas volumes, where a combination of higher flows from the Haynesville Shale and associated volumes drove the increase.
“With oil prices in the mid-$30s, we expect shut-in volumes to begin making their way back into the market, and it’s possible we’re seeing the first signs of this already,” the TPH analysts said. “In total, we estimate about 2-3 Bcf/d of production is shut in, meaning last week’s average dry gas production of 89 Bcf/d may represent the low point on gas supply.”
July crude oil futures were up $1.10 to $34.35/bbl at around 8:40 a.m. ET, while June RBOB gasoline was up about 2.7 cents to $1.0654/gal.
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