As overnight modeling weakened heat expectations for key markets heading into early June, natural gas futures pulled back early Thursday ahead of the latest government inventory report. The June Nymex contract was down 26.9 cents to $8.099/MMBtu at around 8:50 a.m. ET. July was off 26.7 cents to $8.188.
For the latest Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET, major surveys have been pointing to a build in the high 80s Bcf.
Estimates submitted to Bloomberg ranged from 83 Bcf to 93 Bcf, with a median build of 89 Bcf. Results of Reuters’ poll spanned estimated increases of 80 Bcf to 98 Bcf, with a median of 88 Bcf.
A print in line with surveys would also roughly align with historical norms. The five-year average injection for the period is 87 Bcf, while EIA recorded a 71 Bcf injection in the year-earlier period.
“Absent a market-moving surprise…the battle between a potential production recovery versus a possible hotter weather shift may exert a greater influence” on the market over the next seven to 10 days, EBW Analytics Group senior analyst Eli Rubin told clients early Thursday.
Temperatures during the latest EIA report week were “much hotter than normal” for most of the country, aside from cooler conditions over the western and eastern Lower 48, NatGasWeather said.
“Two lines of thinking on the build. Either early season heat overcomes strong wind energy for a build near 83-84 Bcf,” or “strong wind energy offsets last week’s heat and the build prints closer to 90 Bcf,” the firm said.
Meanwhile, looking at overnight forecast changes, models weakened the amount of heat in the pattern for early June, according to the firm.
“Most of the weather data continues to suggest a hotter pattern will attempt to set up across the southern and eastern U.S. June 1-3,” but models “weren’t quite as hot with it in the overnight data, which could be reason for disappointment,” NatGasWeather said, adding that “there’s some pressure on heat coming through to justify decades-high prices.”
From a supply/demand balance perspective, risks for natural gas prices remain skewed to the upside, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
On the demand side, “total generation through May is tracking about 9% above 2021 levels, supportive for the gas market,” even with new highs for wind and solar generation, the TPH analysts said.
Gas generation has been tracking about 4 Bcf/d above the five-year average in recent days, according to TPH estimates.
“On the supply front, while we continue to underwrite a rally in supply into year-end toward the 98-99 Bcf/d range, volumes month-to-date have been largely flat in the 95 Bcf/d range,” the TPH analysts said. “…We continue to see solid risk/reward for the natural gas outlook from here despite the $8 handle, as we see the risk to supply showing up later than our modeling and continuing to tighten balances into year end.”
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