Bolstered by relatively strong cooling demand overall, natural gas futures shrugged off bearish trends in the weather outlook over the weekend to probe slightly higher in early trading Monday. The August Nymex contract was up 1.3 cents to $3.687/MMBtu at around 8:50 a.m. ET.
The natural gas futures market faced mixed signals as of early Monday, analysts at EBW Analytics Group said in a note to clients. They noted a loss of cooling degree days (CDD) over the weekend in the 15-day forecast.
“By Wednesday, however, total CDD nationally are expected to increase more than 10% from this past weekend and generally remain elevated for 10 to 14 days,” the EBW analysts said. “In this context, the direction in which futures move is likely to be heavily affected by the strength of the cash market.
“Prices in the day-ahead market at Henry Hub, which fell back into the $3.50s late last week, are likely to strengthen over the next few days,” the analysts added. “Just how high they rise is likely to have a major impact on the direction in which futures move.”
Bespoke Weather Services characterized changes in the forecast outlook over the weekend as “decidedly bearish.” The firm pointed to cooler changes to projected temperatures for the eastern half of the nation “spread mostly throughout the next 10 to 12 days.”
The American and European weather models advertised a decline of slightly less than 10 gas-weighted degree days compared to Friday’s outlook, according to Bespoke.
“Weather is bearish this morning, but we also see a decline” in liquefied natural gas (LNG) feed gas demand, Bespoke said. “Production more or less is stable, having reached 91.5 Bcf/d over the weekend, but today’s data is back under 91 Bcf/d, pending late-day revisions.”
Lower LNG volumes combined with higher levels of wind generation later this week could put downward pressure on cash prices, the firm said.
“For this reason, along with the overall weaker weather picture, our near-term sentiment has moved to slightly bearish,” Bespoke said.
Meanwhile, from a technical standpoint, natural gas is “starting the week in neutral territory,” according to ICAP Technical Analysis analyst Brian LaRose.
“To open the door for a push to $3.981-4.057 next the bulls will need to lift natural gas up and over the $3.811/3.814/3.822 highs,” LaRose said in a note to clients. “As for the bears, they need to send natural gas plunging back below both $3.492-3.488-3.474-3.476 and $3.373 to have a case for a top and a more significant pullback. In between, we wait.”
August crude oil futures were down $1.08 to $73.48/bbl at around 8:50 a.m. ET.
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