With a toasty June temperature outlook helping the market to shake off a plump weekly inventory build, natural gas futures probed modestly higher in early trading Friday.
The July Nymex contract was up 1.6 cents to $2.837/MMBtu as of 8:30 a.m. ET. August was up 2.4 cents to $2.916.
Even though the latest U.S. Energy Information Administration (EIA) storage report showed inventories increasing faster than expected during the week ending May 31, forecasts as of early Friday teased robust cooling demand into the back half of June.
Maxar’s Weather Desk called for expanding coverage of above-normal temperatures in its updated six- to 10-day projections Friday.
“The six- to 10-day features a Pacific flow pattern, which is directed downstream of a trough migrating from the Gulf of Alaska into the Northwest,” Maxar said. “...Above and much above normal temperatures favor the Interior West early in the period and are quick to expand eastward into the Midwest and East. The second half of the period features highs in the upper 80s to near 90 degrees in Chicago and upper 80s in New York.”
The latest 11- to 15-day outlook maintained a similarly hot pattern versus previous expectations, according to the forecaster.
“Below normal temperatures are confined to the Northwest early in the period, while aboves are widespread in coverage elsewhere,” Maxar said. “Overall, the forecast is among the warmest for the period back to 1950” in terms of population-weighted cooling degree days.
Meanwhile, the 98 Bcf injection into Lower 48 storage reported by EIA for the week ending May 31 missed to the high side as production for the week came in above estimates at 100.2 Bcf/d on average, according to Tudor, Pickering, Holt & Co. (TPH) analyst Justin Martin.
“Looking ahead to next week’s print, we see initial production numbers ticking down to around 99.4 Bcf/d, but with ongoing volatility in the data, we will continue to monitor the settled outcome throughout the week for restatements,” Martin said.
According to Wood Mackenzie analyst Eric McGuire, the latest EIA print implied “fairly significant week/week weather-normalized loosening” in the market.
Some amount of loosening was expected based on an increase in production for the sample period, though the higher production was partially offset by changes in Canadian exports and LNG sendouts, according to McGuire.
“This week’s report implies there was more loosening than what we saw in those components alone,” McGuire said.
