Natural gas futures rallied sharply early Thursday as analysts pointed to stronger overseas prices and a less bearish domestic weather outlook. The November Nymex contract was up 20.9 cents to $5.799/MMBtu at around 8:50 a.m. ET.
In terms of recent weather model runs, EBW Analytics Group analysts early Thursday observed an additional 8.4 Bcf of expected demand over the previous 24 hours resulting from cooler conditions forecast for late October. This has “diminished impacts of recent mild weather,” according to the firm.
“Global natural gas prices are strengthening…as traders grow increasingly restless awaiting signs of more Russian natural gas supply, which may not be coming until the end of the month,” the EBW analysts said.
NatGasWeather characterized the latest forecast outlook as “not quite as bearish as the data showed a few days ago, which isn’t a surprise since the data was so exceptionally bearish.” The upcoming pattern lacks the kind of cold needed to drive bullish sentiment in the market, according to the firm.
“What could matter more is whether widespread cold arrives across Asia and Europe in early November, and the latest data shows bouts of chilly air over northern Europe and northern China in the coming weeks but still waiting on frigid cold shots, typical of fall,” NatGasWeather said.
The firm pointed to “spiking” Dutch Title Transfer Facility prices to explain after hours gains for Henry Hub. “It’s also possible the natural gas markets are expecting a bullish miss for today’s” U.S. Energy Information Administration (EIA) storage report “due to very light wind energy last week.”
Surveys ahead of EIA’s 10:30 a.m. ET storage report show the market anticipating an above-average net injection in the mid- to upper 90s Bcf for the week ended Oct. 8.
Reuters polled 16 analysts, whose estimates ranged from builds of 85 Bcf to 112 Bcf, with a median injection of 95 Bcf. A Bloomberg survey of 11 analysts produced injections as low as 84 Bcf, with a median 97 Bcf. NGI modeled a 93 Bcf injection.
Even at the low end of projections, the next build stands to far surpass last year’s 50 Bcf injection for the same week and the five-year average of 79 Bcf. A build in line with expectations would shrink the current inventory deficit to the five-year average for the fifth straight week.
“It was much warmer than normal over most of the U.S. and only locally cool over the Northwest coast and the Southwest” during this week’s EIA report period, NatGasWeather said. “While temperatures weren’t much different compared to last week’s EIA report, wind energy generation was considerably lighter” to drive the net injection lower for this week’s report.
“We expect a 99 Bcf build but with decent odds it misses lighter due to underestimating the impact from light winds,” NatGasWeather added.
According to the EBW analysts, a recent run of “surprises” versus pre-report expectations from the agency’s weekly data release could increase the potential for “report-driven volatility.”
November crude oil futures were up 92 cents to $81.36/bbl at around 8:50 a.m. ET.
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