With forecasts hinting at the potential for colder temperatures to move into the United States around the middle of December, natural gas futures rebounded in early trading Monday. After tumbling 11.8 cents in Black Friday trading, the January Nymex contract was up 8.3 cents to $2.926/MMBtu at around 8:45 a.m. ET.
Weather models have been mixed in recent runs, according to Bespoke Weather Services. The latest forecast early Monday showed less demand than before the Thanksgiving holiday, but after colder overnight changes demand expectations were higher compared to Friday, the firm said.
“The theme of hovering near the five-year and 10-year normal remains, but in recent models the pattern depicted as we move toward the middle of the month is one that hints at drawing some stronger cold out of Canada into the U.S. pattern,” Bespoke said.
“…Natural gas prices start the week higher throughout the curve…the possibility of a colder pattern seems to be the catalyst for the move higher, although there may be some sense that the move down Friday was simply overdone as well, given that it came on a low volume day.”
Meanwhile, estimates as of early Monday pointed to an uptick in export demand. Genscape Inc. estimated aggregate U.S. liquefied natural gas (LNG) feed gas demand of 10.14 Bcf/d for Monday’s gas day, a roughly 176 MMcf/d day/day increase.
“Interstate pipeline feed gas nominations have averaged 9.40 Bcf/d over the past seven days,” Genscape analyst Allison Hurley wrote in a note to clients. “Demand from facilities on the Gulf Coast accounted for 9.14 Bcf/d,” while the Cove Point and Elba Island LNG facilities “combined for the remaining 1 Bcf/d.
“The largest facility-level day/day change from Sunday to Monday stems from an uptick in nominations to Cameron LNG, jumping 465 MMcf/d day/day from 1.6 Bcf/d to 2.06 Bcf/d.”
On the supply side, Tudor, Pickering, Holt & Co. in a note Monday estimated a 2 Bcf/d increase in production over the past three weeks. That combined with the warm start to winter led the firm’s analysts to revise lower their 2021 Henry Hub price forecast to $2.70.
“The recent supply increase to 91 Bcf/d pushes our end-of-winter storage forecast to 1.9 Tcf…and with LNG cancelations expected to begin again in May, pricing may need to soften moderately relative to strip to incentivize incremental power generation and prevent a late-summer storage crunch,” the TPH analysts said.
“However, beginning in 4Q2021 the bulls are on parade, as we expect a return to full LNG utilization.” This “won’t be as fleeting this time around as a firming of the global market sets up a period of prolonged strength in 2022 and 2023.”
January crude oil futures were down 14 cents to $45.39/bbl at around 8:45 a.m. ET, while December RBOB gasoline was off about 1.5 cents to $1.2675/gal.
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