Natural gas futures were trading slightly higher early Tuesday as the latest weather forecasts showed only minor changes in the outlook, although questions surrounding production and export demand continued to hang over the market. The July Nymex contract was up 1.5 cents to $1.789/MMBtu at around 8:45 a.m. ET.
There were no major changes in the overnight weather data, with the pattern trending slightly warmer into this weekend but slightly cooler for next week, according to NatGasWeather. The forecast remains “very warm over many regions through mid-June, but without widespread heat.
“Also of interest, a weather system in the Gulf of Mexico is expected to strengthen into a named tropical storm in the days ahead, then track toward Texas and the South late this weekend into next week,” the forecaster said. “These types of systems tend to be bearish due to demand destruction through showers and cooling weighing more heavily than production losses.”
Amid declines in both production and liquefied natural gas (LNG) exports, EBW Analytics Group analysts said early Tuesday natural gas prices could experience “considerably more” volatility than normal over the next two weeks.
“Two major pieces of the supply/demand balance are in play at once,” they said. “LNG exports in June are expected to be significantly below May levels. The month/month decline, though, could be as much as 1-1.5 Bcf/d higher or lower than yesterday’s feed gas metric implies. The uncertainty regarding U.S. natural gas production is nearly as great.
“Much as occurred on Monday, the price of the July natural gas contract could swing back and forth intraday and throughout the week as these uncertainties are sorted out.”
Looking ahead to Thursday’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 107 Bcf injection for the week ending May 29.
This week’s report is “subject to an unusual amount of noise” partly from the “magnitude of the Memorial Day holiday impact,” the firm said in a recent note to clients. “Last year, we utilized a holiday adjustment factor of around 9%. This year, with factories still shuttered in some areas, and supply chain disruptions holding back output and staggered shifts at those factories trying to get back up and running, we have utilized a factor closer to 5%.”
July crude oil futures were up 57 cents to $36.01/bbl at around 8:45 a.m. ET, while July RBOB gasoline was up about 3.0 cents to $1.0964/gal.
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