After suffering heavy losses in the previous session, natural gas futures recovered a few cents in early trading Tuesday amid mixed trends in forecasts overnight. Coming off a 16.9-cent sell-off Monday, January Nymex futures were up 3.8 cents to $2.444/MMBtu at around 8:50 a.m. ET.
Trends in the overnight guidance were mixed, with the American Global Forecast System adding some heating degree days (HDD) to the outlook but with the European modeling dropping HDD, according to NatGasWeather.
Both models remained “quite bearish” in their projections for the next 15 days outside of a three-day period early next week when “a cold shot exits the west-central U.S. and tracks across the East,” the firm said. Otherwise, “the coming upper pattern will be warm to much warmer versus normal over most of the U.S., especially the important Midwest region.
[Plan for natural gas pricing 10 years out with NGI’s Forward Look – forward curve data.]
“What continues to make the coming pattern emphatically bearish is the weather data shows a very warm setup on the back end of the 15-day forecast as the Arctic cold pool remains too far north to be tapped by U.S. weather systems.”
The firm said it’s looking to the Dec. 25-30 time frame as the next chance for colder temperatures to “finally” reach the U.S.
Prices along the winter strip took a beating in Monday’s session as forecasts continued to disappoint bulls. Still, despite the “awful” weather-driven demand so far this winter, analysts at Tudor, Pickering, Holt & Co. (TPH) said the market appears to be pricing in “soft first quarter weather as well.”
This has the firm’s analysts “biased to the upside on gas pricing. The weakest first quarter of the past decade occurred in 2017, with residential/commercial demand averaging 35.1 Bcf/d, and rolling this into our model for 1Q2021 puts end-of-season storage at 2.1 Tcf.
“However, with a strip move to $2.50 we also expect a pickup in power generation demand (less gas-to-coal switching) providing a natural offset by adding around 350 Bcf of demand over the injection season and limiting peak storage to 3.9 Tcf,” the TPH analysts added. “From this perspective, we see the current strip underwriting a pretty dismal outcome.”
Meanwhile, TPH estimates show recent liquefied natural gas (LNG) feed gas volumes running at around 11.2 Bcf/d, above its forecast of 10.4 Bcf/d. Further, the firm said it sees upside for LNG utilization through the second and third quarters of 2021, and potential downside for production under lower prices.
“All of this to say, the gas market appears to be pricing in all the bad but none of the good,” the TPH analysts said.
From a technical standpoint, analysts at ICAP Technical Analysis said bears failed to “decisively crack” a key band of resistance between $2.458 and $2.407.
“Focusing on Monday’s $2.381 low for that reason,” LaRose said. “Hold here, and there is a chance for a corrective bounce. Take out this level instead and there is airspace down to $2.303, then $2.181-2.138-2.126-2.125-2.098.”
January crude oil futures were down 33 cents to $45.43/bbl at around 8:50 a.m. ET, while January RBOB gasoline was up fractionally to $1.2585/gal.
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December 08, 2020 at 09:05PM
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Natural Gas Futures Pare Losses Early as Analysts See Upside for Prices Following Sell-Off - Natural Gas Intelligence
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