As traders considered the potential impacts of Hurricane Isaias reaching the Florida coast this weekend, and as analysts mulled summer balances following the latest government inventory data, natural gas futures recovered some of their recent losses in early trading Friday.
The September Nymex contract was up 2.5 cents to $1.854/MMBtu at around 8:50 a.m. ET.
The latest forecast from Bespoke Weather Services remained unchanged day/day early Friday, although the firm did note “slightly cooler” trends in the European model.
This model “is still our preference given the look of the upcoming air pattern along with recent verifications, which have been decidedly to the cooler side compared to what was forecast out in the medium range,” Bespoke said. “Next week is our cooler week, with a sizable trough diving into the middle of the nation, which pushes eastward slowly next week.
“We also expect some impact along the East Coast from Hurricane Isaias the next few days,” the forecaster said. “It is not clear yet if this storm will bring demand destruction to the big cities of the East, but that is a possibility.”
As of 8 a.m. ET Friday, Isaias had strengthened into a hurricane and remained on course to threaten the Florida coast, according to the National Hurricane Center (NHC). The storm was near the Bahamas early Friday, carrying maximum sustained winds of 80 mph.
“On the forecast track, the center of Isaias will move near or over the Southeastern Bahamas today,” the NHC said. “Isaias is forecast to be near the Central Bahamas tonight and move near or over the Northwestern Bahamas and be near or east of the Florida peninsula on Saturday and Sunday.”
Meanwhile, analysts Friday continued to digest the implications of Thursday’s Energy Information Administration (EIA) storage report, a 26 Bcf injection for the week ending July 24. The build lifted inventories to 3,241 Bcf, exceeding the year-ago level of 2,615 Bcf and the five-year average of 2,812 Bcf.
Analysts at Tudor, Pickering, Holt & Co. (TPH) viewed the print as implying a roughly balanced market after adjusting for weather.
“On the one hand, record power burn appears to have largely removed the risk of filling storage, which, in our view, is the key driver of the recent strength,” the TPH analysts said in a note to clients early Friday. “On the other hand, weather forecasts are trending materially cooler for August, and this will likely push inventories above the high end of the five-year range through August.
“All said, we think gas is priced fairly at the moment and expect prices to remain sub-$2 through summer, while the 2021 strip at around $2.70 is roughly in-line with our current thinking of $2.75.”
September crude oil futures were up 40 cents to $40.32/bbl at around 8:50 a.m. ET, while August RBOB gasoline was off about 1.1 cents to $1.2095/gal.
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