As the latest forecasts moderated somewhat on expected heat, and as analysts continued to mull balances following the latest government storage data, natural gas futures were trading close to even early Friday. Coming off a 4.5-cent sell-off in Thursday’s session, the August Nymex contract was up 1.5 cents to $1.794/MMBtu at around 8:40 a.m. ET.

Over the past 24 hours, guidance has eased off on the intensity of heat in the forecast, with changes focused around next week, Bespoke Weather Services said. The week ending July 17 had shown gas-weighted degree day totals as high as 105-106 several days ago, but that figure was down to 97.5 as of early Friday, the forecaster said.

This is “still quite hot and well above normal levels, but models have had a tendency to run too hot in the medium range in this pattern,” Bespoke said. “Offsetting that is the fact that above normal days continue rolling into the back of the forecast, which we think continues into late month and into August.

“At the end of the day, this keeps us on pace to edge out July 2011 for the hottest month on record, though the risk is that models could wind up being too hot in the week ending July 24 now, given what we have been seeing as the forecast rolls forward.”

Meanwhile, the U.S. Energy Information Administration (EIA) on Thursday reported an injection of 56 Bcf into natural gas storage for the week ending July 3, lighter than both the 83 Bcf build recorded a year ago and the five-year average injection of 68 Bcf. 

Prior to the report, a Bloomberg survey found a median injection estimate of 59 Bcf. The average of a Wall Street Journal survey was 57 Bcf, while a Reuters poll landed at 58 Bcf. NGI estimated an injection of 66 Bcf.

“While the report itself was fairly benign the price action was anything but, as gas sold off 2.6% on the day and nearly 6% versus the intraday high,” analysts at Tudor, Pickering, Holt & Co. (TPH) said early Friday. “Gas appears to have gotten caught in a broad market sell-off, driven by escalating fears of a second wave of Covid-19.

“…Near-term fundamentals have become a battleground, as a pop in associated gas supply has been counteracted by forecasts of record heat for July, with a dose of unplanned midstream maintenance thrown in.”

The TPH analysts expect the next few EIA report weeks to show in-line or slightly below normal builds as heat boosts cooling demand.

“However, we see risk/reward skewed to the downside, as the potential for heat to fade, coupled with continued supply adds from associated gas” and from Northeast operators, could “push the market back into oversupply,” the TPH team said.

August crude oil futures were down 37 cents to $39.25/bbl at around 8:40 a.m. ET, while August RBOB gasoline was off fractionally to $1.2490/gal.