As traders shrugged off hotter trends in the latest forecasts amid a mix of other factors weighing on prices heading toward the end of the injection season, natural gas futures pared their recent gains in early trading Wednesday. The September Nymex contract was off 2.0 cents to $2.397/MMBtu at around 8:45 a.m. ET.
The latest forecast from Bespoke Weather Services as of early Wednesday showed hotter trends day/day, with the European model still advertising a “much hotter” outlook compared to the American dataset.
“We still feel” the European model “is running too hot, though we do see early next week as hotter, and, at least for now, ensembles show less potential for tropical disruption than they showed previously, which is something we were on the lookout for as a downside demand risk,” Bespoke said.
The recent extreme heat in the West has helped push demand to above-normal levels overall despite more moderate temperatures in the eastern half of the country, the firm noted.
However, weather does not appear to be a major driver behind the recent rally for natural gas. Based on the prospect of stronger liquefied natural gas (LNG) exports, domestic prices have recently been mirroring price moves in Europe, according to Bespoke.
“This makes sense, although most of the market has already been factoring in LNG growth into late summer and especially the autumn season, and with price-induced loosening showing up in power burns, we feel the market is getting ahead of itself by running the front of the curve up too much on the bullish winter thesis, as these are two separate issues,” Bespoke said.
Analysts at EBW Analytics Group pointed to a number of potentially competing factors influencing natural gas prices heading into Wednesday’s trading. Weaker cash prices are likely to be offset by the warmer trends in the latest forecast outlook.
Prices could also see a boost from “hopes analysts will raise LNG export projections for October, when more information is likely to become available regarding” exports from Cheniere Energy Inc.’s terminals, they said. “Positioning ahead of tomorrow’s storage report could also play a role late in the day.
“Natural gas has risen very far, very fast.” However, “there is still room” for the October/January spread “to tighten by another 30 cents, leaving the door open for further gains.”
Looking ahead to Thursday’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 46 Bcf build for the week ending Aug. 14. The firm estimated a 2.0 Bcf/d week/week increase in power burn for the report period based on a 20% “spike” in population-weighted cooling degree days.
“Lower 48 supply edged up by 0.1 Bcf/d week/week as maintenance canceled gains from associated plays,” the firm said, adding that maintenance in the Gulf of Mexico and in West Virginia also depressed supply during the period.
“Eastern Canada flipped to counter-seasonal net exports late in the week on regional heat, boosting net trade and total supply above early-week forecasts,” according to Energy Aspects.
NGI’s storage model predicted a 46 Bcf injection for the period. Last year, EIA recorded a 56 Bcf build for the similar week, while the five-year average is a 44 Bcf injection.
September crude oil futures were off 42 cents to $42.47/bbl at around 8:50 a.m. ET, while September RBOB gasoline was down about 2.6 cents to $1.2570/gal.
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