Natural gas futures hovered close to even in early trading Monday, with prices pausing after recent gains even as analysts pointed to further upside moving into the summer. The June Nymex contract was down 1.7 cents to $2.914/MMBtu at around 8:45 a.m. ET.
Weather-driven demand expectations trended slightly higher over the weekend, with the forecast period containing a mix of heating degree days (HDD) and cooling degree days (CDD), according to Bespoke Weather Services.
“Cooling into the eastern half of the nation later this week gives HDD a boost for a few days, but the pattern is projected to turn warmer as we move to the middle of the month, lifting CDD totals somewhat, though not yet to levels high enough to significantly boost demand,” Bespoke said. “We feel the warmer tilt to the pattern will continue in the back half of May, increasing the odds of more meaningful cooling demand showing up in many locations.”
Meanwhile, Bespoke noted “supportive” changes in other daily data points, including production and power burns.
“We have moved some 40 cents off the recent lows, so some pause would not be a surprise, but the market may want to test that $3.00 level in prompt month pricing this week first, given continued strength in the data, despite the rallying over the last few weeks,” the firm added.
Even as the 2021 futures strip has gained around 25 cents over the past three weeks, another 25-cent move higher could be in the cards, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
“We continue to view gas-to-coal switching as the primary balancing mechanism, and the recent move higher in price helps bring our model closer to balance, shaving about 1 Bcf/d off our power burn estimate,” the TPH analysts said in a note to clients Monday.
The firm’s updated end-of-season storage estimate shows inventories peaking at 3.5 Tcf, or 7% below the five-year average.
“We view this as a tenuous level heading into next winter” as additional liquefied natural gas export capacity could begin to come online by the end of the year, the TPH analysts said.
This would result in an estimated 2 Bcf/d undersupply and deplete storage to 1.2 Tcf by the end of the upcoming winter.
“As such, we see summer 2021 pricing needing to push an incremental 25 cents higher to shave another 1 Bcf/d off power generation and allow an additional 200 Bcf or so to flow into storage,” the TPH analysts said.
Looking ahead to Thursday’s Energy Information Administration storage report, NGI’s machine learning model predicted a 76 Bcf injection for the week ended April 30. That would compare with a 103 Bcf build recorded in the similar week a year ago and a five-year average injection of 81 Bcf.
June crude oil futures were off 15 cents to $63.43/bbl at around 8:45 a.m. ET, while June RBOB gasoline was down about 1.1 cents to $2.0657/gal.
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