As recent forecasts hinted at widespread summer heat developing later this month, natural gas futures advanced in early trading Wednesday. The July Nymex contract was up 5.7 cents to $2.643/MMBtu as of 8:42 a.m. ET.
The July contract on Tuesday dropped 17.0 cents, erasing Monday’s 16.9-cent rally.
EBW Analytics Group analyst Eli Rubin pointed to “news of improving pipeline availability and technical correlations with retreating” Dutch Title Transfer Facility futures as factors contributing to the price reversal.
NatGasWeather similarly noted the early resolution of a restriction on the ANR Pipeline as one potential reason for Tuesday’s sell-off.
ANR on Tuesday lifted a force majeure related to an equipment failure that had been limiting flows through its Eunice Southbound location in Louisiana. A previous bulletin board notice had projected capacity restrictions through Eunice Southbound into next week, but the operator on Tuesday said it was lifting the capacity restriction immediately.
Daily operating capacity was listed at around 900,000 Dth for Wednesday in Wood Mackenzie’s flow data, up from around 350,000 Dth on Monday.
The Eunice Southbound force majeure had coincided with heavy upward pressure on Henry Hub cash prices. Spot prices at the benchmark surged 86.5 cents day/day in Monday’s trading, averaging $2.635, according to Daily Gas Price Index data.
ANR on Tuesday declared a different force majeure event at the Evangeline Southbound location, another Louisiana throughput meter to the north of Eunice. The operator said it discovered an anomaly during a recent inspection and would be reducing capacity through Evangeline Southbound until mid-June.
According to Wood Mackenzie analyst Alex Sealy, flow data indicated the Evangeline Southbound force majeure was restricting around 100,000 MMBtu/d.
Meanwhile, EBW’s Rubin early Wednesday highlighted increasing cooling demand expectations for the June 14-20 period based on forecasts suggesting heat over the western Lower 48 could shift eastward later this month.
Although milder temperatures over the eastern Lower 48 and a “soft patch for LNG” could hamper demand next week, “the outlook for the back half of June is bullish,” Rubin said.
In the near term, the market could experience more volatility “as the July contract seeks a new trading range after the May short squeeze,” according to the analyst.
NatGasWeather observed warmer trends in recent weather model runs for the “important” nine- to 15-day time frame.
Both the American and European datasets “trended hotter with the pattern for June 15-20 as upper high pressure expands in coverage to rule most of the U.S. with highs of mid-80s to 100s, hottest California to Texas,” NatGasWeather said.
Hotter-than-normal weather through the back half of June could help trim the Lower 48 storage surplus versus the five-year average to around 450 Bcf, according to the firm.
