Coming off a dramatic sell-off in the previous session, natural gas futures held their ground early Tuesday, although bearish themes continued in the latest forecasts. The December Nymex contract was up 1.2 cents to $2.709/MMBtu at around 8:45 a.m. ET.
The temperature outlook to start the winter heating season has been thoroughly disappointing from the bulls’ perspective, and it showed in Monday’s session when the front month collapsed 29.8 cents day/day. The overnight guidance heading into Tuesday’s trading didn’t appear likely to change the market’s perceptions of a bearish early winter.
The major weather models added around 4-6 heating degree days back to the outlook overnight, according to NatGasWeather.
However, the data “held a solidly bearish overall U.S. pattern” from Thursday through Dec. 1 that would see “only minor bouts of subfreezing air into the northern U.S.,” the forecaster said. “There will still be relatively strong demand the next couple days due to a cold shot across the Great Lakes and Northeast, but a second cold shot into the Midwest” early next week “has trended less impressive in recent days.”
Further emphasizing the bearish look to the forecast, warmer than normal conditions are favored for most of the country in the Nov. 25-Dec. 1 time frame.
Liquefied natural gas exports have helped keep the supply/demand balance “exceptionally tight,” but “recent weather data has yet to show when more impressive cold will arrive across the northern U.S., and this led to the natural gas markets getting frustrated Monday, with prices collapsing,” NatGasWeather said. “The next opportunity for colder air into the U.S. still won’t be until the first week of December.”
Aside from the mild weather outlook, rising production also played a role in sending futures plummeting to start the week, according to Genscape Inc. analyst Joe Bernardi.
“Production is hovering around the 90 Bcf/d mark for the first time since the end of April,” Bernardi said, noting that associated gas production dropped significantly at that time to bring total Lower 48 output below the 90 Bcf/d threshold.
“It hasn’t yet returned above that 90 Bcf/d level, but the recent five-day average (subject as always to revisions) is hovering at 89.6 Bcf/d,” the analyst said. “Northeast production has rebounded significantly over the last several weeks, fueling the gains.”
Looking at the technicals, the December contract on Monday broke below support at $2.851-2.821, opening the door for prices to test $2.683-2.658-2.646, according to ICAP Technical Analysis.
“The question now, will this band provide support?” ICAP analyst Brian LaRose asked in a note to clients.
Should prices continue to slide, LaRose pegged the next areas of support at $2.538-2.512, or potentially $2.414-2.407.
December crude oil futures were off 67 cents to $40.67/bbl at around 8:45 a.m. ET, while December RBOB gasoline was down about 2.0 cents to $1.1271/gal.
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November 17, 2020 at 09:00PM
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December Natural Gas Steady Early as Forecasts Remain Bearish - Natural Gas Intelligence
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