Volatile natural gas futures were trading sharply lower early Friday amid a cooling weather outlook, though analysts continued to see upside risks for prices. The June Nymex contract was down 27.7 cents to $8.031/MMBtu at around 8:50 a.m. ET. July was off 27.8 cents to $8.122. 

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Forecast trends were cooler day/day, with changes focused on next week, Bespoke Weather Services said early Friday.

Still, “all models remain adamant about the return of stronger heat as we end the month and head into the start of June,” the firm said.

There was little in the underlying fundamentals data to justify the strong sell-off early Friday, according to Bespoke. The firm said it still viewed the outlook for natural gas as bullish overall.

“Production remains a bit off highs,” while liquefied natural gas (LNG) feed gas demand was back above 13 Bcf/d in the latest estimates, Bespoke said. Meanwhile, “power burns continue to look quite strong.”

Anticipating day-to-day price moves is a “tough guess” in light of “insane intraday swings both ways, but given what we are seeing in our data, we have no change to our idea that we have not yet seen the highs of the year in the natural gas market,” Bespoke added.

On Thursday the Energy Information Administration (EIA) reported an 89 Bcf injection into U.S. natural gas stocks for the week ended May 13. The print was in line with expectations and slightly outpaced the five-year average.

Total Lower 48 working gas in underground storage ended the period at 1,732 Bcf, 310 Bcf (minus 15.2%) below the five-year average, according to EIA.

“On a weather-adjusted basis, we estimate the market was about 4 Bcf/d oversupplied, unchanged from the previous week,” Tudor, Pickering, Holt & Co. (TPH) analysts said of the latest EIA report.

Looking at demand factors, demand for power generation has been tracking about 4-6 Bcf/d above norms in recent days, according to TPH. Recent residential/commercial demand has lagged five-year average levels by around 1.2 Bcf/d amid a shift from cooler temperatures toward cooling degree days as the main driver of weather-driven demand, the firm estimated.

“Volumes on the LNG front exited the week at the highest levels in some time as maintenance begins to wrap up at various facilities,” the TPH analysts said. This includes demand at the Calcasieu Pass terminal “surpassing 1.2 Bcf/d in recent days, pushing total LNG exports just north of 13 Bcf/d — a seven-week high.”

TPH’s preliminary modeling as of Friday was pointing to a 90 Bcf injection for next week’s EIA report, which would come in slightly tighter than the five-year average build of 97 Bcf.