Natural gas futures were trading lower early Friday as uncertainty over near-term weather demand shifted attention away from a rebound in Freeport LNG feed gas flows and Thursday’s bullish government storage report.
The June Nymex contract was down 3.5 cents to $2.266/MMBtu at around 8:45 a.m. ET. An hour earlier, the contract had been trading around $2.322 before it began its decline.
Uncertainty about weather-driven demand in the coming days could be one factor behind the dip.
The two major weather models diverged in overnight updates, with one forecasting cooler temperatures and the other favoring a warm-up for the Lower 48, NatGasWeather said. Cooler conditions in Texas and the East forecast by the American weather model would keep temperatures “rather nice,” while hotter conditions forecast by the European model would boost cooling demand, the forecaster said.
“Hopefully this discrepancy gets resolved in the midday data or it will make for a potentially dangerous weekend to hold” because if the European model “is wrong and trends cooler, it could lead to disappointment,” NatGasWeather said.
Meanwhile, a rebound in feed gas flows to the Freeport liquefied natural gas terminal has supported sentiment. The facility’s feed gas nominations for Friday were set to top 2 Bcf/d for the first time since the terminal went down in January, according to Wood Mackenzie data.
Friday nominations stood at about 2.01 Bcf/d to Freeport, up from about 1.76 Bcf/d Thursday, the firm’s data show. Thursday was the first time flows to the facility cleared the 1.5 Bcf/d level since January.
LNG export volumes have taken center stage in recent weeks for setting price direction for futures with weather-driven demand subdued in the spring. But that has created a bumpy ride for futures amid maintenance outages and shifting expectations for new terminal completions.
“The next couple days will most likely be guided by the clash of LNG facilities,” Mizuho Securities USA LLC Energy Futures Director Robert Yawger told clients. While Freeport’s rebound this week has favored the bulls, a potential delay for the Golden Pass LNG project to a second half 2025 start-up has been a bearish factor, he said.
On Thursday, the apparent restart of Freeport’s third train and a bullish government storage print helped drive an 11.4-cent gain in June futures to $2.301, the highest level for the front month since early March, according to EBW Analytics Group analyst Eli Rubin.
The U.S. Energy Information Administration (EIA) on Thursday reported a 79 Bcf injection into Lower 48 storage for the week ended May 3. That was at the low end of expectations and lighter than the five-year average.
The increase for last week lifted inventories to 2,563 Bcf, or 640 Bcf higher than the five-year average and 444 Bcf above year-ago levels, according to EIA.
The latest EIA print implied the market was 3.7 Bcf/d tighter than the five-year average when compared to degree days and normal seasonality, Wood Mackenzie analyst Eric McGuire told clients. That tightness marked a nearly 5 Bcf/d shift from the past five weeks that had been looser on average, he said.
Rubin noted that Nymex futures could soon lose some of their support. Weather-driven demand reached a short-term peak and would soon shed heating demand in northern regions.
“A lack of true early season cooling demand and returning gas supply with concluding pipeline maintenance may lead to some weakness for the Nymex front-month – even as the bullish medium-term fundamental outlook remains bright,” Rubin said.
