Despite an expected warm-up in the eastern half of the country by the end of this coming weekend, the natural gas futures market staged a partial rebound on Tuesday as some market watchers were expecting last week’s frigid cold to translate into a storage draw of 200-300 Bcf in Thursday’s report.
The February contract on Tuesday gained back 13.7 cents of Monday’s 29.5-cent decline to close the regular session at $5.591.
“The natural gas market is attempting a rebound on the ideas that the recent price drop was overdone and a large net withdrawal from natural gas storage is likely in Thursday’s [Department of Energy] report, but such a rally is now opposed by the forecasts for warmer temperatures over the next two weeks,” said Tim Evans, an analyst with Citi Futures Perspective in New York.
Looking at the storage report for the week ending Jan. 8, Evans said his early estimate is for a hardy 195 Bcf withdrawal, which would be much larger than both the 87 Bcf date-adjusted pull recorded last year for the similar week and the five-year average draw of 76 Bcf. Other early withdrawal projections run as high as 270 Bcf (see related story).
With each passing day, Evans said the warm-up forecast for next week gets a little warmer. “[Tuesday’s] updates show warmer expectations in both the two- to five- and six- to 10-day forecasts relative to Monday’s outlook, and some of the variances look quite large, comparable to the departures below normal in the recent cold snap,” he said. “January as a whole may end up averaging near normal on a population-weighted degree day accumulation basis, but with some record-setting extremes making up that average.”
Heating requirements for the week from New England to Wisconsin are expected to be mostly normal to below normal, but far lower than last week. The National Weather Service estimated that for the week ending Jan. 16, New England should see 281 heating degree days (HDD), two fewer than normal and nine fewer than last week. New York, New Jersey and Pennsylvania are expected to experience 268 HDD, five more than normal but 23 fewer than last week. The greatest change was reserved for the Midwest from Ohio to Wisconsin where 275 HDD were predicted, 22 fewer than normal and 73 fewer than last week.
The near-term warm-up notwithstanding, analysts are cautious that cold could return and eliminate the present supply surplus. “Although current focus is on warming trends during the next couple of weeks, a return to exceptionally cold trends next month could easily force a virtual erasure of the supply surplus by the end of this quarter. In sum, we feel that the upcoming warming patterns have been discounted via an approximate 75-cent sell-off from last Thursday’s high” to Monday’s close, said Jim Ritterbusch of Ritterbusch and Associates.
Ritterbusch is also looking for gains in industrial demand. “We remain of the opinion that demand from the industrial and power sectors is likely improving at a stronger than previously expected pace. With this in mind, we will look for today’s monthly EIA [Energy Information Administration] report to bring some upward revisions in natural gas demand across both this quarter and 2010. Some guidance in this regard will also be provided at week’s end with the release of industrial production figures,” he said in a Tuesday morning note to clients.
The EIA’s Short-Term Energy Outlook for January predicts demand in 2010 will remain basically flat to 2009 levels (see related story).
The warming trend might just make it to the end of the month. Commodity Weather Group said “strong warming” will persist for most of the next two weeks. The “biggest anomalies [are] favored for [the] northern half of the nation,” said Matt Rogers, the firm’s president.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |