Cooler forecast trends for next week and the prospect of restored pipeline capacity uncorking additional supply helped send natural gas futures sharply lower in early trading Friday. The September Nymex contract was down 11.4 cents to $3.945/MMBtu at around 8:55 a.m. ET.
The latest 15-day forecast from Bespoke Weather Services shifted somewhat cooler day/day, including projections for less heat into the eastern half of the nation for next week.
However, “we continue to see above normal heat return as we head into the following week,” Bespoke said. “…This tentatively places the week ending Aug. 13 close to this week’s level of heat.”
When measuring in total national gas-weighted degree days, the 15-day period overall projects to come in close to the five-year average as a result of next week’s cooler temperatures, according to Bespoke.
Meanwhile, Texas Eastern Transmission Co. (Tetco) notified shippers Thursday evening that it has received approval from federal regulators to return its 30-inch diameter system to full operating pressure, with capacity expected to increase starting next week.
According to Bespoke, this should increase southbound flows on the system and could “have some impact on Henry Hub pricing specifically.” However, the firm doesn’t see the restored capacity “significantly affecting the supply/demand balance.”
In terms of recent balances, the Energy Information Administration (EIA) on Thursday reported an injection of 36 Bcf into U.S. natural gas storage for the week ended July 23, bullish relative to market expectations. The build for the July 23 week lifted inventories to 2,714 Bcf, far below the year-earlier level of 3,237 Bcf and below the five-year average of 2,882 Bcf.
“While degree days were little changed versus the previous week, power demand increased by 12 Bcf due to a large decline in renewable generation,” Wood Mackenzie analyst Eric Fell said of the latest EIA report period.
This week’s EIA print is about 2.4 Bcf/d tighter than the prior five-year average when compared to degree days and normal seasonality, according to the firm’s estimates.
“Four of the last six weeks have been tight by more than 2 Bcf/d,” Fell said. “Each of these tight weeks has corresponded to nuclear/renewable generation coming in at/below the prior five-year average, which goes against the grain of growing renewable generation over time due to growth in wind and solar capacity only partially offset by nuclear retirements.”
Analysts at Tudor, Pickering, Holt & Co. (TPH) similarly pointed to power generation and above average weather-driven demand as the main factors “driving the price bus” recently.
The TPH analysts noted that “seasonal weakness in renewables power generation has driven significant reliance on thermal generation in the recent heat. While coal generation hasn’t quite been up to the task of backing out gas demand, it’s certainly giving it the ol’ college try.”
The firm estimated around 3.7 GWh of coal-fired generation over the past few days, the highest level in TPH’s 2018-2021 dataset.
“Looking ahead, with weather expected to moderate we’ll be watchful for gas’ resilience within the thermal stack,” the TPH analysts said.
September crude oil futures were off 8 cents to $73.54/bbl at around 8:55 a.m. ET.
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