Natural gas futures traded sharply lower early Monday as the latest forecasts lowered weather-driven demand expectations and signaled that mild weather could stretch into early December. The December Nymex contract was off 15.1 cents to $2.844/MMBtu at around 8:40 a.m. ET.
Weather data was “decidedly” bearish trending over the weekend, with forecast demand dropping compared to Friday’s expectations, according to Bespoke Weather Services.
Models showed a “strong” positive Eastern Pacific Oscillation (EPO) at the end of the month that signals “what is increasingly likely to be a warm to very warm start to December,” the forecaster said. “…In order to weaken the positive EPO signal, we need to see a meaningful shift in tropical forcing eastward away from the Indian Ocean/far West Pacific. So far, we do not see signs of this, but it is something that will take some time to occur.
“Until then, the best we are able to do is find a couple of near normal days here and there, mixing into the overall warm regime.”
Based on the weekend weather trends, analysts at EBW Analytics Group estimated a cumulative decline of 13.5 degree days for the next three storage weeks, resulting in a loss of 26.3 Bcf of demand.
“Just as significantly, the pattern setup on day 15 suggests that milder-than-normal weather could last through the first week in December before moving closer to normal,” the EBW analysts said. Still, even if recent forecasts hold the long-standing surplus in Lower 48 gas stocks is likely to “quickly dwindle” by early next month, a development that could trigger a rebound in prices.
“Near term, though, the December contract is likely to re-test support at $2.78-2.86 — and possibly lower,” the EBW analysts said.
The U.S. Energy Information Administration (EIA) on Friday reported an 8 Bcf injection into storage for the week ending Nov. 6, bearish versus the median of major polls. The increase for the latest covered week lifted inventories to 3,927 Bcf, up from 3,731 Bcf a year earlier and ahead of the five-year average of 3,751 Bcf.
Analysts at Tudor, Pickering, Holt & Co. (TPH) are anticipating another net injection for this week’s report as “old man winter remains tardy.” The firm issued a preliminary estimate for a 20 Bcf injection.
“Friday’s build wasn’t unusual from a seasonality perspective, as six of the last seven years have reported builds for the corresponding week, but this week’s build would represent a material departure from norms of minus 46 Bcf,” the TPH analysts said.
Liquefied natural gas feed gas demand “keeps hitting new record levels,” but still, production has climbed back to around 90 Bcf/d on rebounding Northeast volumes, according to TPH estimates.
“With the soft start to winter, we expect inventories to exit the year above the five-year average, meaning it will likely take a brutally cold January/February to put any sort of scarcity premium into gas,” the analysts said.
December crude oil futures were up $1.67 to $41.80/bbl at around 8:40 a.m. ET, while December RBOB gasoline was up about 3.7 cents to $1.1621/gal.
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November 16, 2020 at 08:58PM
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Natural Gas Tumbles on Bearish Forecasts as 'Old Man Winter Remains Tardy' - Natural Gas Intelligence
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