September natural gas futures were set to open Friday about 2.5 cents higher at around $2.933/MMBtu, bouncing back from the prior session’s storage-driven declines as forecasters noted overnight gains in projected cooling demand.
Models came in “significantly warmer” overnight, lessening “the trough through next week that should deliver the first colder shot of the season and then more amplified with a ridge across the East that will help return quite a bit of heat,” according to Bespoke Weather Services. “Forecasts do still cool rapidly into next week with at least one broad cold shot, though not quite to the intensity that was previously imagined, and it is quickly replaced by strong heat from the Midwest to the Northeast that should pull” gas-weighted degree days “back solidly above average.”
The warmer forecast could prompt a test of resistance at $2.95-2.96 heading into the weekend, according to Bespoke.
“We may begin to see some cash weakness as we price in cooler weather next week, but not as much as previously expected given easing cool weather,” the firm said. “Production around record levels and expectations that burns loosen over the weekend should help limit prices from breaking out much higher, and eventually once forecasts trend back cooler or heat gets priced in we would expect prices to reverse back lower on clear loosening in the market.”
EBW Analytics Group CEO Andy Weissman similarly pointed to a warmer shift in the six- to 10-day outlook overnight.
“Last night’s shift does not materially change the picture for the remainder of the summer, but has triggered a modest rebound in early trading,” Weissman said. “While the September contract could close higher today, our overall view remains bearish.” By the Aug. 31-Sept. 6 storage week, “injections could reach 90 Bcf per week, with continued increases later in September. By a week from now, the September contract is likely to fall to $2.85 or below.”
Prompt-month futures slid Thursday after the Energy Information Administration (EIA) reported a 33 Bcf build into storage inventories for the week ending Aug. 10, slightly higher than most estimates that pointed to a build in the high 20 Bcf range.
“Weather-adjusted the market was slightly oversupplied (less than 0.5 Bcf/d) as U.S. production has risen around 800 MMcf/d over the past two weeks,” analysts with Tudor, Pickering, Holt & Co. Inc. (TPH) said Friday of the latest EIA data. “Temperatures appear to be cooling, but warmer-than-normal temperatures on the coasts are likely to still be positive for demand.”
Even with strong supply growth, strong demand driven by warmer weather “is preventing the market from being structurally oversupplied,” the TPH team said. “In short, we’re waiting to see ”actual’ rather than just ”forecasted’ cooler temperatures.”
September crude oil was set to open about 58 cents higher at around $66.04/bbl, while September RBOB gasoline was trading about 1.2 cents higher at around $1.9996/gal.
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