As news that President Trump tested positive for the coronavirus roiled markets the world over, natural gas futures were down sharply in early trading Friday, mirroring declines in crude. The November Nymex contract was off 12.0 cents to $2.407/MMBtu at around 8:40 a.m. ET.
News of Trump’s positive test, revealed by the president himself over Twitter in the early morning hours Friday, dominated headlines and injected another dose of uncertainty into an economy already wracked by the year’s unprecedented events.
“Democratic nominee Joe Biden has reason to be concerned” after being “in close proximity to the President during the debate,” Mizuho Securities USA LLC analyst Robert Yawger said. “Stimulus negotiations, Supreme Court nomination, the next debate, and campaigning with just 32 days until the election, are just some of the issues up in the air at the moment.”
Natural gas traders had plenty to think about even before waking up to the morning’s jolting news.
Weakness in the physical market, mild weather setting up into mid-October and inventories building to well above-average levels for this time of year all weighed on prices heading into Friday’s session.
Bespoke Weather Services attributed the early selling to “expectations for very weak cash…given the high storage situation in conjunction with a weak demand picture. The entire curve continues to get pummeled as well, which makes little sense given that the fundamental picture looks much different once we are at the end of injection season.”
The weather picture “isn’t great for bulls,” according to the firm, but contracts deeper into the winter “are at a growing risk for a snap back higher. It’s just a matter of when the market decides to let the November contract completely disconnect from the rest of the curve, the timing of which is difficult to pinpoint.”
Meanwhile, analysts Friday continued mulling the implications of the latest Energy Information Administration (EIA) storage report, a 76 Bcf build recorded for the week ending Sept. 25. The 76 Bcf build compared with a 109 Bcf injection for the similar week last year and the five-year average build of 78 Bcf.
Stocks currently sit at 3,756 Bcf, 405 Bcf higher than the five-year average, but storage could be approaching an “inflection point,” according to analysts at Tudor, Pickering, Holt & Co. (TPH).
“Storage levels are at their highest seasonal level in the past 10 years, but things are about to change,” the TPH analysts said. “…We think next week marks the inflection point, as we’re looking for a build of 65 Bcf, versus norms of 90 Bcf, and by year-end, we see the surplus shrinking to around 200 Bcf.”
TPH projects a “slow convergence” through the first quarter of 2021, with stockpiles returning to five-year average levels in early April under a normal weather scenario.
“And then things get interesting,” the TPH analysts said. “On our current estimates, we see a meaningful storage deficit materializing” by the end of the 2021 injection season, “ending October 2021 at 3,348 Bcf, or 375 Bcf below the five-year. If this plays out and the market has to find balance through power generation, we think mid-$3.00 prices could be in play in 4Q2021, particularly if oil prices continue to languish.”
November crude oil futures were down $1.47 to $37.25/bbl at around 8:40 a.m. ET, while November RBOB gasoline was off about 4.6 cents to $1.1068/gal.
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