As weather models continued to imply a potentially mild mid-November, natural gas futures lost ground in early trading Friday. Coming off a 41.6-cent sell-off in the previous session, the December Nymex contract was down another 15.5 cents to $5.627/MMBtu at around 8:45 a.m. ET.
The latest model runs early Friday advertised little net change in weather-driven demand expectations compared to 24 hours earlier, according to Bespoke Weather Services. Model trends also continued to point to warmer conditions into the middle third of November, the firm said.
There is “some decent cold on the way, especially mid to late next week in the eastern half of the nation in response to a brief ridge spike up into Northwest Canada,” Bespoke said. “But as this feature collapses and Pacific flow returns, we should moderate and evolve back warmer than normal, first in the middle of the nation, then spreading into the East.”
As for price action early Friday, Bespoke pointed to domestic production gains and “a continued meltdown in prices over in Europe thanks to headlines that more Russian gas is on the way” as the likely drivers of selling, more so than changes to the weather outlook.
Meanwhile, the U.S. Energy Information Administration (EIA) on Thursday reported an 87 Bcf injection into U.S. gas stocks for the week ended Oct. 22. The print was in line with estimates and well above the five-year average 62 Bcf injection for the period.
Total Lower 48 working gas in underground storage ended the week at 3,548 Bcf, 3.4% below the five-year average of 3,674 Bcf, according to EIA.
Higher residential/commercial demand resulted in a slightly tighter market week/week compared to the 92 Bcf injection reported in the prior week, analysts at Tudor, Pickering, Holt & Co. (TPH) said.
“Supply has been topical of late outside of forecasts for early November weather, which drove a significant bid in gas this week,” the TPH analysts said. Flow data suggests “volumes again reaching the 94 Bcf/d range this week, albeit with some volatility, with the Haynesville Shale in particular sticking out after having risen toward the 12.86 Bcf/d level before trending lower.”
Meanwhile, associated gas supply has been “below recent peak levels,” with output from the Bakken Shale and Permian Basin lagging early October levels by around 0.5 Bcf/d combined, according to TPH.
Wood Mackenzie said the latest EIA print implied 1.1 Bcf/d of looseness in the market when adjusting for degree days and normal seasonality.
Wind generation came in slightly below normal for the week, according to Wood Mackenzie analyst Eric Fell.
“Wind utilization for the month of October appears likely to set a multi-year low (similar to what we saw in July),” Fell said. “Very low wind utilization in the months of July and October has driven average wind utilization across the April-October injection season about 2% lower than the prior five-year average. Although we continue to set new seasonal records for wind generation, wind has actually underperformed over the summer versus a normal utilization profile.”
December Nymex crude oil futures were down 48 cents to $82.33/bbl at around 8:45 a.m. ET.
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