Ahead of what is expected to be a bullish inventory report, August natural gas futures were seesawing on early Thursday on either side of the prior day settlement.
The newly anointed front month contract was down 3.2 cents to $2.713/MMBtu at around 8:00 a.m. ET. The July natural gas contract rolled off the board at $2.628
Total natural gas inventories, which exceeded the five-year average by more than 40% in March, have steadily declined over the past two months and stood at 23% as of June 14.
Further supply tightening was expected as the market was poised for the latest storage figures from the U.S. Energy Information Administration (EIA) scheduled to be issued at 10:30 a.m. ET.
Projections for the EIA storage print, covering the week ended June 21, ranged below the five-year average build of 85 Bcf and the year-ago increase of 81 Bcf.
NGI modeled a 54 Bcf increase. Injection estimates submitted to Reuters ranged from 32 Bcf to 58 Bcf, with a median of 50 Bcf. Bloomberg’s survey spanned 49 Bcf to 63 Bcf and generated a median estimate of 54 Bcf.
NatGasWeather said during the review week, “It was hotter than normal over the eastern half of the U.S., as well as the Southwest.” It also was “cooler versus normal over the Northwest to Northern Plains, as well as Texas due to tropical rains.”
Looking ahead, overnight revisions to weather forecasts remained bullish. The American weather model trended 4 cooling degree days (CDD) hotter, while the European model was less than 1 CDD changed, NatGasWeather said.
The models continued to forecast near-record total CDDs for the coming 15 days. NatGasWeather cautioned, though, that both the models had over-forecast high temperatures last summer and appeared to be doing so again..
“The coming pattern is still quite hot overall and with demand strong to very strong,” NatGasWeather said.
EBW Analytics Group analyst Eli Rubin said the severity of heat remained critical to the chances of Nymex natural gas retaking $3.00. “In our view, bulls appear cautious after recent near-term forecast downgrades.”
Further, Rubin noted that current forecasts called for more than 200 CDDs through July. However, they are “not yet fully priced in, offering moderately higher gas prices if scorching mid-July heat verifies.”
Also on the demand side, Cheniere Energy Inc.’s Corpus Christi LNG terminal in South Texas was wrapping up a repair and upgrade pipeline project on Wednesday, which had reduced gas intake by 30%.
Feed gas flows to domestic liquefied natural gas facilities were expected to rise. However, Wood Mackenzie estimates showed LNG feed gas demand at only 11.2 million Dth on Thursday.
Meanwhile, Wood Mackenzie data showed production averaged 101.0 Bdf/d last week, which is up substantially from spring lows in the mid-90s Bcf/d. The firm’s Thursday estimate was 100.1 Bcf/d.
