Weighed down by mild temperatures near term and weakness in the physical market, natural gas futures were trading slightly lower early Tuesday. The July Nymex contract was down 1.5 cents to $1.654/MMBtu at around 8:45 a.m. ET.
Following Monday’s declines, the July contract has now fallen more than 14 cents since late last week, a slide that analysts at EBW Analytics Group attributed to “extremely weak near-term cash market demand.” They noted that the selling occurred even as their estimates showed no major day/day changes in production or liquefied natural gas (LNG) feed gas flows.
“With hotter weather expected to arrive Friday, cash prices should start to strengthen before the week ends, establishing a near-term bottom,” the EBW analysts said. “For the next day or two, though, the July contract could continue to slide, potentially testing support at $1.61 or below.”
The Global Forecast System (GFS) added 3 cooling degree days (CDD) to the outlook overnight, according to NatGasWeather.
The European model, meanwhile, remained unchanged in terms of degree days, meaning it “held the 13 CDD it lost Monday on cooler trends,” the forecaster said. “No major changes as a bearish pattern is still expected through next week due to a stalled weather system over the East this week, followed by a new weather system arriving into the Midwest and east-central U.S. late this weekend and next week.”
This system is expected to result in lighter-than-normal demand as it brings widespread showers and highs in the 60s and 70s, NatGasWeather said.
“We continue to look to June 26-30 as the next opportunity for more ominous widespread heat to arrive but with more evidence needed,” the forecaster said.
Looking at the supply picture, production has been experiencing a “tepid recovery” this month, according to estimates from Energy Aspects.
“That recovery has been weighted toward marginal early associated production gains as gas-directed receipts from the Haynesville Shale and Appalachia remain range-bound,” the firm said. “…We have downwardly revised our crude shut-in assumptions for June, raising the baseline of production.
“As the production seeps back into the pipeline grid, the market is also contending with severely deflated feed gas volumes into LNG terminals — a phenomenon that is not expected to change at any point in the coming weeks. Aside from weather, market fundamentals are shaping up to be supply heavy.”
July crude oil futures were up $1.29 to $38.41/bbl at around 8:45 a.m. ET, while July RBOB gasoline was up about 4.0 cents to $1.2059/gal.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |