Natural gas futures hovered close to even early Friday as forecasts continued to favor frigid temperatures moving into parts of the Lower 48 next month, while analysts contemplated the implications of this week’s “disappointing” inventory data. The March Nymex contract was up 0.7 cents to $2.671/MMBtu at around 8:35 a.m. ET.
As of early Friday both the American and European weather models came in colder versus 24 hours earlier, although the latest data from the European came in warmer versus Thursday’s afternoon run, according to Bespoke Weather Services.
“Storm-induced variability is still the theme over the next week or so, followed by a more substantial push of cold into the central/western U.S. next weekend into the following week,” Bespoke said.
The upcoming cold push should do enough to drive above-normal gas-weighted degree days during that time frame nationally, even with the chilliest temperatures not expected to reach the East, according to the firm.
The warmer-trending overnight run of the European model “brought in some sellers,” Bespoke said. “We still side with colder risks, overall, in this setup. Given how cold has failed to materialize all winter, we feel expectations are skewed away from cold here, at least somewhat, and any verification of cold will be bullish to the market.”
Meanwhile, the Energy Information Administration (EIA) reported a withdrawal of 128 Bcf from U.S. gas stocks for the week ended Jan. 22, well below both the midpoint of analysts’ estimates and the week-earlier print.
Last year, EIA recorded a decrease in inventories of 170 Bcf, and the five-year average withdrawal for the comparable week is 174 Bcf. The draw for the Jan. 22 week decreased inventories to 2,881 Bcf, compared to the year-earlier level of 2,803 Bcf and the five-year average of 2,637 Bcf.
Analysts at Tudor, Pickering, Holt & Co. (TPH) called this week’s EIA storage report “another disappointing print” from the agency.
“However, next week is shaping up much, much better, with some winter weather finally hitting the U.S. and driving an estimated 5 Bcf/d week/week increase in residential/commercial demand,” the TPH analysts said. “With Mexican exports and power generation also running high, things are lining up for a print in the 185 Bcf range.”
Looking further ahead, forecasts through the first two weeks of February “look quite constructive” as a “deep cold spell” looks to move across the Northern Plains and into the Midwest, according to TPH.
“The largest unknown right now seems to be just how far east the cold will extend and if major populations in Chicago and the East Coast will feel the frost,” the TPH analysts said.
With around six weeks of “peak winter demand” left, based on the latest forecasts the TPH team now doesn’t expect stockpiles to exit the heating season “meaningfully” above the five-year average, “if at all.”
March crude oil futures were trading 39 cents higher to $52.73/bbl at around 8:35 a.m. ET, while February RBOB gasoline was up about 4.0 cents to $1.6230/gal.
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