Rising cooling demand expectations in recent weather model runs had natural gas futures rebounding sharply in early trading Tuesday. The July Nymex contract was up 9.2 cents to $3.162/MMBtu at around 8:50 a.m. ET.
After settling 2.7 cents lower at $3.070 in Monday’s session, the July contract “quickly rebounded” in after hours trading following a run of the European weather model that showed a large increase in projected cooling degree days (CDD), analysts at EBW Analytics Group said.
The CDD increase resulted from projections for weaker cooling in the Midwest and East next week, according to the firm.
“Overnight, the European model kept its late-day gains, and the American, while still cooler, posted its own large gain,” the EBW analysts said. “With both models now warmer than during the regular trading session yesterday, the July contract is poised to rise further this morning.”
According to NatGasWeather, the American weather model added 7 CDD in its overnight run. However, the model showed a pattern that “still wasn’t quite hot enough June 15-20 due to a barrage of weather systems tracking across the Great Lakes and East,” the firm said. “…It’s this rather comfortable pattern over the Great Lakes and eastern third of the U.S. June 15-20 that makes the pattern not as impressive as needed to be considered solidly bullish. But it’s apparently hot enough to satisfy, with prices at multi-week highs.”
Production and liquefied natural gas feed gas demand levels are “the most bearish they’ve been in more than a month,” NatGasWeather said. After this week’s heat it’s “debatable” whether the temperature outlook is “hot enough” given the cooler projections from the American model starting around mid-June.
“It’s possible hot highs of mid-90s to lower 100s over Texas the next several days will firm cash prices and are carrying over to futures prices as well,” the firm added.
Meanwhile, looking ahead to this week’s Energy Information Administration (EIA) storage report, NGI’s model is calling for a 100 Bcf injection for the week ended June 4. That would compare with a 95 Bcf build recorded a year earlier and a 92 Bcf five-year average injection.
Energy Aspects issued a preliminary estimate for a 111 Bcf injection for the upcoming EIA report.
The firm modeled a 0.3 Bcf/d week/week drop in production for the period.
However, that drop in supply was overshadowed by a “nearly 4 Bcf/d plunge in gas power burn and a holiday impact in industrial demand,” Energy Aspects said.
July crude oil futures were off 35 cents to $68.88/bbl at around 8:50 a.m. ET, while July RBOB gasoline was down about a penny to $2.1829/gal.
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