Buoyed by forecasts showing frigid temperatures finding their way into the Lower 48 later this month, natural gas futures rallied in early trading Tuesday. The February Nymex contract had surged 11.8 cents to $2.865/MMBtu as of 8:40 a.m. ET.
Overall gas-weighted degree day expectations were largely unchanged day/day in the latest Bespoke Weather Services forecast early Tuesday. However, the firm noted colder trends in the 11-15 day time frame as models showed potential for “strong cold at least from the Midwest westward.”
“Models over the last couple of cycles have abruptly moved toward” a combination of a negative Eastern Pacific Oscillation and negative North Atlantic Oscillation in the medium term, Bespoke said. This “will develop a strong cold source up in Canada and push into parts of the U.S., something we have not seen all season.
“While the greatest impacts look to be Central/West, some cold can bleed into the East as well…This type of pattern is also capable of sending Arctic cold down into Texas as well, with an attendant risk for freeze-offs in natural gas production.”
NatGasWeather similarly noted the potential for stronger cold to push into the United States around Jan. 23-26, but the firm highlighted disagreement between the European model and the American Global Forecast System (GFS) for this time frame.
“The overnight weather data was mixed, with the GFS trending colder, while the European model” trended milder for Jan. 23-26 “by seeing cold air over the Rockies fail to release as aggressively eastward,” NatGasWeather said. “…To our view, the weather data for Jan. 23-26 risks warmer trends in time, especially across the East, as the latest European data suggests.”
Meanwhile, the surplus in U.S. natural gas stocks compared to year-ago levels could evaporate this month even as weather has not exactly impressed so far this winter.
“The Lower 48 year/year storage overhang will finally come to an end in January as balances continue to tighten,” analysts at Energy Aspects said in a recent note to clients. “Every week of December saw a higher year/year withdrawal, a trend that is likely to endure” into this month.
“The question then becomes whether inventories will unwind enough over the rest of 1Q2021 for there to be significant supply concerns for the 2021-22 heating season,” the analysts said.
Energy Aspects is modeling a 1.59 Tcf storage carryout at the end of March.
Liquefied natural gas (LNG) feed gas demand is likely to see a notable year/year bump in 2021, according to the firm, which is modeling an average 10.75 Bcf/d of feed gas volumes for the first quarter, a 2.1 Bcf/d year/year increase.
“The real gains in LNG feed gas will come during the injection season, given we do not expect any commercial turndown of cargoes this year,” Energy Aspects analysts said. “Feed gas will thus grow by 4.5 Bcf/d year/year from April to October after last year’s heavy cancelations and hurricane disruptions, limiting storage builds for the bulk of the summer.”
February crude oil futures were up 56 cents to $52.81/bbl at around 8:40 a.m. ET, while February RBOB gasoline was up about 1.7 cents to $1.5379/gal.
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