A weakening weather-driven demand outlook in the overnight guidance kept the pressure on natural gas futures in early trading Tuesday, sending the December Nymex contract tumbling 9.9 cents to $3.145/MMBtu as of around 8:40 a.m. ET.
Overnight data from the American and European weather models extended warm trends from earlier in the week, with both datasets dropping close to 10 heating degree days from the outlook, according to NatGasWeather.
“Overall, the timing of major weather features to impact the U.S. through mid-November held, with a solidly bearish setup this week into next week due to warmer than normal conditions ruling much of the country,” the forecaster said. “A modest bump in national demand is still expected for the second half of next week as cold air spreads across the West and Plains.
“However, the amount of cold air to arrive has decreased, as has the amount of coverage, thereby losing a hefty amount of demand the past two days.”
The overnight data further favors milder conditions spreading across much of the country in the Nov. 15-18 time frame, NatGasWeather said.
Looking longer term, Energy Aspects recently modeled a 1.4 Tcf carryout for the end of March, a projection that would assume 10-year normal weather beyond the second week of November. A 5% colder than normal scenario for December and January would remove 60 Bcf and 65 Bcf, respectively, from this total, according to the firm.
“Such a scenario for December 2020-January 2021, while not our base case, would likely produce daily price spikes above even our January 2021 forecast for $3.55/MMBtu, as it would cause our 1.4 Tcf end-March carryout to dwindle with weeks to go in the heating season,” Energy Aspects said.
Conversely, a 5% warmer-than-normal scenario would ease storage concerns, with such milder conditions from December through March adding 220 Bcf back to the firm’s end-March 2021 carryout estimate.
“Long-term weather trends and the La Nina pattern set to occur this winter indicate that the risk is weighted more toward this warmer-than-normal scenario,” Energy Aspects said.
Meanwhile, after Monday’s sell-off bulls have failed to push prices on the December contract above a band of resistance at $3.362-3.370-3.404, according to ICAP Technical Analysis analyst Brian LaRose.
“Instead, natural gas reversed sharply from a $3.396 high,” LaRose said. “Once again, bulls did not get the job done. We’re turning our attention to support as we head into mid-week; if the bulls want to salvage the case for a push to $3.593-3.614 they will have to prevent natural gas from falling below $3.119-3.103. We will be looking to retest the $2.922 low if the bulls cannot turn things around.”
December crude oil futures were up $1.27 to $38.08/bbl at around 8:40 a.m. ET, while December RBOB gasoline was up about 2.8 cents to $1.0797/gal.
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November 03, 2020 at 09:02PM
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Weather 'Solidly Bearish' After Further Milder Trends; Natural Gas Futures Tumble Early - Natural Gas Intelligence
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