Natural gas futures were virtually unchanged in early trading Monday, holding onto recent gains as updated forecasts eased off somewhat on expected heat over the next two weeks. The July Nymex contract was up 0.8 cents to $3.304/MMBtu at around 8:45 a.m. ET.
The July contract is coming off a roaring 14.7-cent rally in Friday’s session. Supply concerns associated with potentially prolonged restrictions on the Texas Eastern Transmission Co. (Tetco) system catalyzed the run higher.
“We believe the market may still be underestimating the impact of the anomaly discovered on Tetco’s 30-inch pipeline,” analysts at EBW Analytics Group said in a note to clients early Monday. This would especially be the case “if it is found to extend into other segments of the line or takes many more months to repair than the time frame specified in the Tetco notice, as we believe is likely to occur.
“It may take weeks or even months before the gas market fully recognizes the extent of the impact,” the EBW analysts added.
In the near-term, there is potential for prices to “pull back modestly” as the market reacts to day-to-day shifts in the weather outlook, according to the firm.
The latest forecast from Bespoke Weather Services early Monday showed cooler trends compared to previous expectations but maintained a “hotter overall base state.” The cooler change occurred on projections showing less heat in the Midwest, the firm said.
“Best heat in the near term remains in the western half of the nation, where some records likely fall this week, though as we move closer to the end of the month, some modest above normal temperatures can return to the eastern U.S.,” Bespoke said.
As for other data points, Bespoke observed gains in both Lower 48 production and liquefied natural gas sendout in its latest estimates.
“Power burns continue looking stronger in our weather-adjusted model, aided somewhat by a recent spike in nuclear outages,” Bespoke said. “…While we would not be surprised at a pullback after such a strong move higher recently…confidence is too low, for now, to say that is more likely than not.”
From a technical perspective, bears will need to act quickly to arrest the upward momentum following Friday’s rally, according to ICAP Technical Analysis.
“Bears need to stage an immediate intervention to start the week if they want to have a shot at derailing an upside breakout,” ICAP analyst Brian LaRose said. “By intervention I mean they must send natural gas crashing back below both $3.154-3.116 and $3.045.”
If that doesn’t happen “we will be gunning for the $3.500-3.505-3.522-3.527 neighborhood next. We see $3.396 as the only obstacle left in this case.”
July crude oil futures were up 73 cents to $71.64/bbl at around 8:45 a.m. ET, while July RBOB gasoline was up fractionally to $2.1927/gal.
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