A somewhat cooler look to temperatures late this month and the prospect of demand destruction from a storm in the Gulf of Mexico (GOM) helped send natural gas futures lower in early trading Friday. The July Nymex contract was off 6.5 cents to $3.188/MMBtu at around 8:50 a.m. ET.
The American and European weather models added cooling degree days (CDD) overnight for next week, according to NatGasWeather.
However, the pattern for Tuesday through Friday of next week remained “not quite hot enough” and would result in “only moderate national demand,” the firm said.
The European model lost a few CDD for the June 27-July 1 time frame overnight, NatGasWeather added. Models during this period continued to advertise “very warm to hot conditions over much of the western, southern and eastern U.S. with highs of mid-80s to mid-90s, 100s over the Southwest. But with the overnight European losing a few CDD for this important period, the natural gas markets likely noticed.”
The National Hurricane Center (NHC) said a potential tropical cyclone in the GOM was making its way north and expected to approach the north-central Gulf Coast by tonight or early Saturday.
“A slow northeastward motion across the southeastern United States is likely after landfall through the weekend,” the NHC said.
The storm’s imminent landfall may have been “aiding selling” in the futures market early Friday, NatGasWeather said. Its impacts “are likely to be primarily bearish due to demand destruction from showers and cooling, as well as the potential for delays” to liquefied natural gas cargoes.
Meanwhile, the Energy Information Administration (EIA) on Thursday reported an injection of 16 Bcf into natural gas storage for the week ended June 11, a print skewed by a one-time adjustment in the Pacific that drove down working gas stocks in that region. The implied build of 67 Bcf for the week came in a few ticks below median estimates.
To put the magnitude of the 51 Bcf adjustment in the Pacific in context, analysts at Tudor, Pickering, Holt & Co. (TPH) said the region went from 4% surplus to the five-year average prior to the revision to a 13% deficit.
Power generation demand during the latest report week remained “significantly stronger than seasonal norms” in the firm’s estimates, with gas enjoying a greater than 60% share of thermal generation despite recent gains in futures pricing.
“While our forward modeling remains conservative on gas’ share of thermal generation, the lack of response to pricing from coal continues to represent potential upside to our $3.25/MMBtu summer call,” the TPH analysts said.
July crude oil futures were down 73 cents to $70.31/bbl at around 8:50 a.m. ET, while July RBOB gasoline was down about 1.7 cents to $2.1176/gal.
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