With no major changes to the weather outlook overnight, and with traders awaiting the latest government inventory data to get an updated read on balances, natural gas futures were trading slightly lower early Thursday. The April Nymex contract was off 2.5 cents to $2.791/MMBtu at around 8:45 a.m. ET.
Predictions ahead of today’s Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET, have been pointing to a triple-digit withdrawal in the neighborhood of 130-150 Bcf.
A Bloomberg survey found withdrawal estimates ranging from 134 Bcf to 162 Bcf, with a median 148 Bcf decrease. A Reuters poll found pull estimates spanning from 93 Bcf to 150 Bcf and a median estimate for a 135 Bcf decline in stocks. A Wall Street Journal poll, meanwhile, landed at an average withdrawal of 144 Bcf, with estimates ranging from decreases of 117 Bcf to 162 Bcf.
NGI’s model estimated a 135 Bcf withdrawal for the upcoming report, which covers the week ended Feb. 26.
The estimates compare with a 119 Bcf pull recorded for the same week a year earlier and a five-year average decline of 81 Bcf, according to EIA.
“There was a mix between slightly cool and slightly warm conditions over the entire country during the sample week,” NatGasWeather said.
As for overnight changes to the temperature outlook, NatGasWeather said both the American and European models remained mostly unchanged compared to 24 hours prior.
“The timing of swings in national demand held, with moderate national demand through Sunday due to a chilly cold shot sweeping across the Great Lakes and East with lows of 10s to 30s,” the firm said. “However, a warm ridge is still expected to set up over the eastern two thirds of the country next week…As a result, next week remains solidly bearish/warmer than normal with the lightest demand since last fall.”
Further out, the latest guidance early Thursday continued to point to cold air over the Rockies and Plains spreading eastward to deliver more seasonal demand during the March 14-17 time frame, NatGasWeather said.
With the storage deficit to the five-year average set to widen to more than 220 Bcf after today’s EIA report, “the background state has become increasingly bullish,” the firm said. “But weather patterns are going to need to be a little colder going forward if deficits are to increase further.”
Meanwhile, some effects of the February deep freeze that plunged deep into the central Lower 48 and rocked the physical natural gas market last month still linger, but in terms of the “major impacts” to supply and demand, conditions have returned to normal, according to Wood Mackenzie.
“Production levels rebounded quickly after most freeze-offs and other cold related impacts resolved just a week after production bottomed out at around 70 Bcf/d on Feb. 17,” Wood Mackenzie analyst Dan Spangler said in a note to clients Thursday. “Current production estimates are back around 90 Bcf/d.”
On the demand side, liquefied natural gas exports “recovered quickly” following the cold blast, with estimated liquefaction volumes approaching 10 Bcf/d by Feb. 23 after dropping as low as 1.3 Bcf/d on Feb. 16, Spangler said.
“Some components of supply and demand took longer to recover,” the analyst said. “Power demand was heavily affected by the weather-driven demand spike but was also heavily constrained by the plant, grid and gas supply outages and limitations.
“…Mexico was hit by similar outages and gas supply issues, but exports to Mexico are back to normal levels, with Tuesday’s estimate breaking the 6 Bcf/d mark.”
April crude oil futures were up $1.26 to $62.54/bbl at around 8:45 a.m. ET, while April RBOB gasoline was up about 1.3 cents to $1.9650/gal.
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