Pressured by milder August weather forecasts and steady production gains, September natural gas futures were trading lower early Tuesday.
The September Nymex contract was down 2.2 cents at $2.014/MMBtu at around 8:40 a.m. ET. The contract had traded as low as $1.991 after selling off by more than 7.0 cents.
Forecasts have been billing August to be the hottest on record. However, weather models ahead of Tuesday’s session slightly trimmed national demand for the second week of August by adding cooler air over the Midwest, according to NatGasWeather. The outlook maintained ample heat in most other regions.
September futures may bounce from “broiling heat Thursday and Friday,” according to EBW Analytics Group’s Eli Rubin, senior analyst. The forecast heat helped lift next-day cash prices overall on Monday. However, Henry Hub languished at an average of $1.870, its lowest level in two months, according to NGI’s Daily Gas Price Index.
Tropical threats and production risks suggested “a narrow path for bulls,” Rubin said.
Echoing Rubin on weather risks, NatGasWeather said summer weather tends to play out cooler than advertised, especially with ocean-borne storms in the mix.
“There are ways cooling degree days/demand disappoints, and one way this could be accomplished is through a tropical cyclone tracking into the U.S. with cooler temperatures,” NatGasWeather said. “Sure enough, there’s one lurking for later this weekend.”
In an update overnight, the National Hurricane Center said a tropical depression could form in the Atlantic Ocean late this week near the Greater Antilles or Bahamas. Its possible path still pointed toward Florida.
On the supply side, Wood Mackenzie’s daily production estimates for Tuesday showed overall domestic output at 102.2 Bcf/d. Monday’s sample was revised higher by around 0.6 Bcf/d to 102.7 Bcf/d.
“Production numbers remain a primary focus for Henry Hub bears, which benefited from a streak of failed forecast tailwinds in the first weeks of July,” according to analysts at Mobius Risk Group.
