Prompt month natural gas futures continued to slide in early trading Thursday as higher production volumes are butting up against hotter weather and an expected trimming of the storage surplus.
The July Nymex contract was off 6.2 cents to $2.983/MMBtu at 8:50 a.m. ET. The contract fell 8.4 cents in Wednesday’s trading after adding 22.3 cents the day before.
“Reasons for selling were difficult to pinpoint,” NatGasWeather said. Some analysts suggested consolidation and profit-taking after Tuesday’s sharp advance.
Overnight production estimates from Wood Mackenzie appeared to confirm exploration and production company decisions to restart shut-in output as prices moved above $3 and sweltering weather conditions were forecast into July.
Wood Mackenzie estimates showed output at 100.1 Bcf Thursday. The firm noted that the seven-day average was 100.0 Bcf/d.
Meanwhile, EBW Analytics Group analyst Eli Rubin said indecisiveness could continue in the near future because of signs of cooling tropical rains, “but a blistering end to June could drive natural gas prices higher.”
Hurricane season officially began June 1, and that has turned more attention to the Tropics.
“Widespread flooding in South Florida has led Gov. Ron DeSantis to declare a state of emergency, in a warning of a potentially historic hurricane season,” Rubin noted.
According to the National Hurricane Center, two systems churning off the southeastern Atlantic Coast had a 20% chance of developing into tropical storms within the next seven to 10 days. Another thunderstorm cluster in the southern part of the Gulf of Mexico also may threaten Texas and Louisiana by the middle of next week.
“While most hurricane demand destruction is typically in late summer and early fall, early-season storm landfall may cause periodic downside for Nymex natural gas,” Rubin said.
Conversely, Maxar’s Weather Desk meteorologist Steve Silver said hotter changes were in store for the six- to 10-day period from the Midwest to the Northeast. Temperatures are “much and in some cases near strong” above normal levels, he said. Highs were expected to reach the low and mid-90s throughout the period in Chicago, with mid-90s in Boston and New York, and upper 90s in Philadelphia and Washington, DC.
The hot weather pattern was supported into the 11- to 15-day period, Silver added.
Amid the varying supply and demand-side fundamentals, attention is on the 10:30 a.m. ET release of the latest storage data from the U.S. Energy Information Administration (EIA) for the week ended June 7.
Hot conditions across the Southwest were expected to slow the pace of storage build up from previous weeks.
Injection estimates submitted to Reuters ranged from 66 Bcf to 88 Bcf, with a median of 73 Bcf. A survey by Bloomberg netted a range of 70 Bcf to 78 Bcf and a median of 76 Bcf. NGI modeled a build of 78 Bcf. That compares with a five-year average increase of 89 Bcf and year-earlier build of 90 Bcf.
EIA reported an injection of 98 Bcf for the week ended May 31. It lifted storage levels to 2,893 Bcf, but lagging the historical pace, cut the surplus by 1 percentage point to 25% above the five-year average.
