As analysts continued to mull the balance implications of the latest inventory report, traders shrugged off a cooler shift in the overnight guidance to send natural gas futures a few cents higher early Friday. The September Nymex contract was up 1.5 cents to $2.197/MMBtu at around 8:40 a.m. ET.
The overnight data from the American modeling advertised a large cooler adjustment for late August, resulting in a decline of 9-10 forecast gas-weighted degree days (GWDD), according to Bespoke Weather Services. The European model “held firm,” showing a similar outlook compared to 24 hours earlier, the forecaster said.
The American dataset showed “yet another cooler trough swinging through the eastern half of the nation” later this month, Bespoke said. “Given the variability we are seeing this month, despite the La Nina base state, we cannot rule this out.”
Power burns continued to look weaker on a weather-adjusted basis, even as stronger heat this week has boosted demand totals, according to Bespoke.
“We feel that there is a demand response to this higher price level, and unless weather comes back convincingly to the hotter side over the weekend, we risk moving back lower, ultimately taking out $2.15 support,” Bespoke said. “This does not change our bullish longer-term lean.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 58 Bcf injection into U.S. gas stocks for the week ending Aug. 7, slightly above consensus estimates for a build in the mid-50s Bcf. Total working gas in storage as of Aug. 7 stood at 3,332 Bcf, which is 608 Bcf higher than last year at this time and 443 Bcf above the five-year average of 2,889 Bcf, EIA said.
“While aggregate storage levels capture most of the mindshare, we think regional storage will begin to become topical, as five-year average build profiles would push the Midwest through capacity, with the East reaching 99% and South Central 97%,” analysts at Tudor, Pickering, Holt & Co. (TPH) said in a note to clients early Friday. “To make matters worse, we’re modeling above normal injections the rest of the way, in part due to reduced power burn as gas prices are pulling coal back into the stack.”
TPH is currently projecting a build of 44 Bcf for next week’s EIA report on the strength of above-normal weather-driven demand.
According to Genscape Inc.’s estimates, the most recent EIA report suggests the market was loose compared to the five-year average by 0.15 Bcf/d.
“During the report week, total production decreased by 0.2 Bcf/d from the previous week,” Genscape analyst Nicole McMurrer said. “…Total power demand dropped 3.6 Bcf/d, coming mainly out of the East, where Tropical Storm Isaias hit early in the week. Midwest power demand also dropped by 1.5 Bcf/d.”
Residential/commercial demand was off 1.2 Bcf/d for the period on decreases in the Midwest and East; industrial demand was flat week/week, while liquefied natural gas feed gas demand increased 0.8 Bcf/d during the report week, according to Genscape.
September crude oil futures were down 11 cents to $42.13/bbl at around 8:40 a.m. ET, while September RBOB gasoline was up around a penny to $1.2451/gal.
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