Forecasts showing weaker weather-driven demand, set against a backdrop of concerns over a storage glut entering the final weeks of the injection season, saw natural gas futures extend their recent losses in early trading Friday. The October Nymex was down 3.4 cents to $2.289/MMBtu at around 8:40 a.m. ET.
November was off 3.1 cents to $2.767, while the peak winter contracts were essentially flat. January was trading at $3.302, down 0.7 cents.
Compared to the previous day’s outlook, the latest forecast data early Friday lowered demand expectations for the final third of September, according to Bespoke Weather Services.
During this period “any above normal temperatures outside of the West look focused in the central/northern U.S., while the South stays near normal,” Bespoke said.
This pattern would result in below normal gas-weighted degree day totals for the nation as a whole on a combination of warmth easing early season heating demand in northern areas and “little enhancement” of cooling demand in the southern part of the country, according to the firm.
“Storage, of course, remains at record levels in some regions, so we will need stronger burns and elevated” liquefied natural gas feed gas demand “to alleviate containment risks,” Bespoke said.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 70 Bcf into Lower 48 gas stocks for the week ending Sept 4, versus an 80 Bcf build in the year-ago period and a five-year average of 68 Bcf. The build lifted inventories to 3,525 Bcf, above the year-earlier level of 2,997 Bcf and above the five-year average of 3,116 Bcf.
The print did little to inspire natural gas bulls, with prices for the front month tumbling 8.3 cents in Thursday’s session.
“The move widened an already large October/January spread that currently sits at around $1.000/MMBtu, which suggests some lingering concern about storage’s ability to absorb surplus gas” through the remaining weeks of the injection season, analysts at Tudor, Pickering, Holt & Co. (TPH) said in a note to clients early Friday. “On our base assumptions, we still see risk to breaching capacity in the South Central and Midwest regions, but both appear to be manageable, making price spreads appear unnecessarily wide.”
Winter pricing “may be a little ahead of itself,” according to the TPH team. Analysts cited a prediction from the National Oceanic and Atmospheric Administration that La Nina conditions could persist through the upcoming winter.
This would mean “warmer than normal temperatures for the populous Northeast region,” TPH said.
October crude oil futures were off 33 cents to $36.97/bbl at around 8:40 a.m. ET, while October RBOB gasoline was down about 1.4 cents to $1.0833/gal.
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