Weak export demand and an uptick in production estimates saw natural gas futures reverse lower in early trading Wednesday. The August Nymex contract was off 4.6 cents to $1.830/MMBtu at around 8:45 a.m. ET.
The sell-off in the August contract could be attributed to a small upward revision in the latest production data and another drop in liquefied natural gas (LNG) feed gas volumes, according to Bespoke Weather Services.
Looking specifically at LNG volumes, the firm said its data as of early Wednesday had feed gas at “another new low for the year so far. The low LNG volumes continue to be the main factor creating headwinds against rallies.”
On the flip side, a “record level” of gas-weighted degree days (GWDD) owing to heat in the forecast has helped to offset the downward pressure from weak export demand, the forecaster said.
Bespoke observed only “very minor detail changes” in the latest guidance.
“The big picture remains the same, which is a much hotter than normal regime that is set to dominate at least the next two to three weeks, if not beyond,” Bespoke said. “…The nature of the pattern is one that doesn’t feature record heat in any one given region, but widespread coverage of above normal temperatures results in record GWDD levels for the nation as a whole, keeping us on pace to edge out 2011 as the hottest July on record in terms of total GWDD.”
On the production front, a force majeure on the Columbia Gas system Monday evening restricting flows on the MXP Line south of the Mount Olive Compressor station has resulted in significant cuts to production in the Northeast, according to Genscape Inc.
“However, production has rebounded from yesterday’s reported nominations as some flows have rerouted,” analysts Nicole McMurrer and Dan Spangler wrote in a note to clients early Wednesday.
Meanwhile, looking ahead to Thursday’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for an injection of 54 Bcf for the week ending July 3.
The firm estimated only “minor moves” in total supply and industrial demand for the period, with each down about 0.2 Bcf/d week/week, putting the focus on power burns as a key driver for this week’s EIA print. Energy Aspects estimated a 15% increase in population-weighted cooling degree days, enough to boost gas burn by 1.5 Bcf/d week/week.
Gains in LNG feed gas demand early last week “were erased after flows to Cameron slumped by 1.0 Bcf/d day/day on July 1,” Energy Aspects said. “This could indicate the shutdown of the facility’s third train for final checks in advance of commercial service by the end of July.”
LNG feed gas averaged 4.0 Bcf/d for last week, a 0.1 Bcf/d week/week decline, according to the firm’s estimates.
August crude oil futures were up 9 cents to $40.71/bbl at around 8:45 a.m. ET, while August RBOB gasoline was unchanged at $1.2750/gal.
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