Natural gas futures probed higher early Friday, supported by favorable weather data and steadily strong cooling demand.
After losing ground Thursday, the September Nymex gas futures contract was up 2.9 cents to $1.997/MMBtu at around 8:45 a.m. ET to start the week’s final session.
“The overnight weather data held very strong national demand through early next week as hot high pressure rules most of the U.S. with highs of upper 80s to 100s,” NatGasWeather said Friday.
The coverage of intense heat could ease beginning next Thursday to Aug. 12, the firm added, “as weather systems track across the Midwest, Ohio Valley and New England with highs of 70s to lower 80s.” Yet it “will still be quite hot over much of the western and southern U.S. with highs of 90s-100s and why national demand is expected to still be relatively strong.”
A bullish government inventory print failed to propel futures on Thursday. However, after a day for traders to digest the data, NatGasWeather said it could add another boost for prices today.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 18 Bcf into storage for the week ended July 26. It was far below the 31 Bcf median found by a Reuters poll. NGI modeled a 29 Bcf increase. The EIA result compared with a five-year average build of 33 Bcf.
Analysts at The Schork Report called it a “meager” print that should attract the attention of gas bulls.
Meanwhile, Wood Mackenzie estimated production on Friday at 101.8 Bcf/d, down from the seven-day average of 102.5 Bcf/d.
NatGasWeather noted a “wildcard” in the form of a tropical system “tracking toward western Florida and the Gulf of Mexico (GOM)” as soon as early next week. “This system is expected to gradually strengthen before making landfall into the U.S. and where impacts are more likely to play out bearish than bullish due to cooler temperatures and power outages.”
The storm is not expected to reach hurricane strength. However, analysts at ClearView Energy Partners noted that, with the onset of August, the hurricane season is projected to accelerate. The National Oceanic and Atmospheric Administration (NOAA) forecast four to seven major hurricanes in the Atlantic Ocean this year. That marks NOAA’s “most significant high-end projection since 2010,” the ClearView analysts said.
“Our analysis shows NOAA’s forecast ranges have proved fairly accurate in prior years,” they added. “Oil production in the GOM remains an important component of overall U.S. supply, but GOM gas production has declined significantly over the past decade and is no longer a material percentage.”
As such, the ClearView analysts echoed NatGasWeather in noting that tropical storms and hurricane impacts on natural gas are likely to prove bearish in the form of demand destruction. This could include damage that disrupts LNG send-outs from export facilities along the Gulf Coast.
Wood Mackenzie estimated liquefied natural gas volumes at 12.6 Bcf/d early Friday. That was in line with the seven-day average.
