The market in early trading Friday appeared to be focused on the bearish leanings from revisions in the latest storage data and revised weather forecasts, including a cooler change in the second half of June, dragging prompt-month natural gas futures lower.
July futures were down 1.8 cents to $2.941/MMBtu at 9:00 a.m. ET. The contract had briefly touched $3.00 before moving to the downside.
The U.S. Energy Information Administration storage report for the week ended June 7 showed a build in line with expectations. However, a revision to the prior weeks’ figures increased the total working gas supply.
“There appear to be other slight week-to-week changes in Midwest inventories over the last several weeks, with the net impact being an additional 7 Bcf of working gas inventory as of last week,” Wood Mackenzie analyst Eric McGuire said Thursday.
The 74 Bcf injections in the week under review still indicated a “sizeable tightening” of supply week-over-week. “The tightening merely unwinds the loosening seen during the Memorial Day weekend and aligns it with the average tightness of the preceding four weeks, McGuire said.
Over the past five weeks, the year-over-year storage surplus had already slumped 86 Bcf and could sink another 2.7 Bcf/d over the next four weeks of EIA storage reports, EBW Analytics Group analyst Eli Rubin noted.
Supporting the expectation, NatGasWeather said a hot ridge would rule the southern and eastern portions of the country in the next seven days. High temperatures were forecast in the 90s to 100s. Meanwhile, cooler weather was forecast for the North, and temperatures in the comfortable 70s to lower 80s range were expected.
NatGasWeather said above-normal temperatures were expected for much of the county from June 21 to June 28. Temperatures were forecast from the mid-80s to lower 90s across the northern reaches and from the upper 80s to 100s to the southern part of the country.
“The incoming heat wave may yield a notable upswing in natural gas production over the next month,” Rubin said. “Many drillers targeting the return of supply in mid-summer may begin to turn wells in-line,” he noted.
“If supply does not grow significantly over the next 30-45 days, the outlook for the second half of 2024 could tighten, raising Nymex gas prices,” Rubin said.
Wood Mackenzie said daily production nominations on Thursday were revised to above 101 Bcf. “This is the first time we have breached 101 Bcf/d in several months,” the firm said. Production stood at 100.4 Bcf Friday, versus 101.3 Bcf a day earlier.
Meanwhile, putting a bearish taint on the market, an elongated area of low pressure off the southeastern Atlantic Coast had a low 20% chance of formation in the next seven days, according to the National Hurricane Center. “Regardless of development, heavy rainfall is forecast to continue across portions of the Florida peninsula through the weekend.”
Soaking rains have the potential to sap demand, providing some relief from extreme heat expected to blanket most of the country through mid-July.
