Higher cooling demand expectations in the latest weather model runs, combined with a large drop in daily Lower 48 production estimates, had natural gas futures advancing in early trading Tuesday. The July Nymex contract was up 6.8 cents to $3.259/MMBtu at around 8:50 a.m. ET.
After dropping several cooling degree days (CDD) from the outlook in Monday’s session, the weather data as of early Tuesday had gained back several CDD, according to NatGasWeather.
This leaves the outlook “hot enough” to drive bullish sentiment “for the entire six- to 15-day period and could be the reason if prices were to rally today, especially with the potential for seasonal buyers to step in ahead of core summer heat,” NatGasWeather said. “The pattern could certainly be hotter, but it should still be considered hot enough for a moderately strong bullish stance.”
Looking at the supply picture, daily pipeline production estimates from Wood Mackenzie were showing a “significant decline” in total Lower 48 output early Tuesday, with production falling nearly 2 Bcf/d day/day, from 92.8 Bcf/d to 90.9 Bcf/d. The declines appeared to correspond to regional maintenance or operational issues, according to the firm.
“In the Haynesville Shale there is maintenance on Gulf South at the Hall Summit Compressor Station that began today and is expected to last through” Thursday, Wood Mackenzie analysts Laura Munder and Nicole McMurrer said in a note to clients.
Output out of the Permian Basin region was being impacted by a force majeure on the El Paso Natural Gas system. And in the Northeast, data showed declines on the Tennessee Gas Pipeline system near ongoing work in Northeast Pennsylvania, Munder and McMurrer said.
Meanwhile, looking ahead to Thursday’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 61 Bcf injection for the week ended June 18.
The firm estimated flat demand week/week from the power sector on a 5% decline in CDD, with Lower 48 production seen as “primarily responsible for the week/week decline in the implied storage rate.”
Energy Aspects estimated a 0.7 Bcf/d decline in production week/week, including easing output from the Rockies, Bakken Shale, Gulf of Mexico, San Juan Basin, Permian and Haynesville.
NGI’s model predicted a 68 Bcf injection for the upcoming report. Last year EIA recorded a 115 Bcf injection for the similar week, while the five-year average is a build of 83 Bcf.
July crude oil futures were down 34 cents to $73.32/bbl at around 8:50 a.m. ET, while July RBOB gasoline was trading fractionally higher at $2.1978/gal.
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