As updated forecasts pointed to a mild start to February, and as traders prepared to digest the latest government inventory data, natural gas futures were down a few cents early Friday. The February Nymex contract was off 3.6 cents to $2.455/MMBtu at around 8:40 a.m. ET.
The U.S. Energy Information Administration (EIA) on Friday could report the largest withdrawal from stockpiles of the season to date, according to projections.
NGI’s model predicted a 191 Bcf withdrawal for the week ended Jan. 15. That would compare with a 97 Bcf pull recorded in the year-ago period and a five-year average withdrawal of 167 Bcf.
A Bloomberg survey landed at a median expected pull of 175 Bcf, with projections ranging from decreases of 158 Bcf to 191 Bcf. A Reuters poll found estimates spanning withdrawals of 133 Bcf to 191 Bcf, with a median decrease of 178 Bcf.
Last week EIA reported a withdrawal of 134 Bcf for the week ended Jan. 8.
This week’s report is scheduled for 10:30 a.m. ET, a day later than usual because of Wednesday’s presidential inauguration and the Martin Luther King Jr. federal holiday on Monday.
“It was colder than normal over Texas and the South as a weather system tracked through with rain and snow, while much warmer than normal across the northern U.S.” during this week’s EIA report period, according to NatGasWeather. “Our algorithm expects a withdrawal of 179-180 Bcf.”
As for the overnight weather data, the firm noted few changes in the outlook from the Global Forecast System (GFS).
“However, the European model trended warmer” by more than 10 heating degree days “and is now quite bearish Jan. 31-Feb. 4 to better match the GFS that had already trended notably warmer yesterday,” NatGasWeather said. “There’s still expected to be strong national demand over the next week as a couple cold shots sweep across the northern and eastern U.S.”
However, the forecast for days 10 through 15 of the outlook period is “looking quite bearish,” indicating that “national demand will return to lighter than normal levels for early February,” according to the firm.
Analysts at Tudor, Pickering, Holt & Co. (TPH) said they see additional downside for Henry Hub prices under further warmth in the weather outlook.
“Warm weather continues to be the fly in the ointment for Henry Hub, and while extended warmth could drive another 25 cents of potential downside, even under such a draconian scenario we still see material upside to the 2Q2021/3Q2021 strip,” the TPH analysts said in a note to clients Friday.
Degree days for the current quarter to date have been tracking 11% below the five-year average, resulting in residential/commercial demand falling about 5.5 Bcf/d below five-year norms over the first three weeks of January, according to TPH estimates.
“If the seasonal warmth continues, we see about 300 Bcf of lost residential/commercial demand for the balance 1Q2021, which would push our end of season storage forecast to 2.2 Tcf and would drive our fiscal year 2021 pricing expectations down by about 25 cents,” the TPH analysts said.
March crude oil futures were down $1.51 to $51.62/bbl at around 8:40 a.m. ET, while February RBOB gasoline was off about 3.6 cents to $1.5116/gal.
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