Coming off a strong rally in the previous session, natural gas futures hovered close to even early Wednesday as forecasts maintained strong heat for the second week of June. The July Nymex contract was up 1.4 cents to $3.118/MMBtu at around 8:50 a.m. ET.
Projections from the European weather model lost several cooling degree days (CDD) overnight for the June 13-17 time frame, according to NatGasWeather. This would see heat ease compared to projected temperatures for Sunday through June 12, which remained “plenty hot enough to satisfy” natural gas markets in the firm’s latest forecast.
“Any further cooler trends for June 13-17 and the pattern might not be hot enough to satisfy, thereby requiring close monitoring in the days ahead,” NatGas Weather said.
In terms of price action, NatGasWeather said it would be watching to see whether the July contract can close above the $3.10 level. The drop in CDD expectations from the European model overnight “could be reason if the natural gas markets wanted a few cents back after yesterday’s strong gains.”
Buoyed by expectations for June heat, the front month rallied 11.8 cents in Tuesday’s session.
Analysts at EBW Analytics Group attributed the surge in prices to both the bullish shift in forecasts over the Memorial Day weekend and a force majeure on the Texas Eastern Transmission Co. (Tetco) pipeline system impacting flows from Appalachia to the South and Midwest.
“From a technical standpoint, after yesterday’s jump higher it would not be surprising if the July contract re-tests support at $3.06, filling in the gap,” the EBW analysts said. “Yesterday’s surge, however, hot on the heels of natural gas’ resilience in May, reduces the risk of the injection-season contracts slipping back under $3.00 — especially with much hotter weather just a few days away.”
Tetco declared a force majeure on Friday, which goes into effect today. That could cut flows on the pipeline system by 1 Bcf/d, according to Wood Mackenzie analyst Dan Spangler. The force majeure is to remain in effect until further notice, the analyst said.
“The declaration reinstates a 20% pressure reduction that will reduce southwest flows out of Pennsylvania up to 1 Bcf/d,” according to Spangler. The event “also caps flows north through Pennsylvania at the Uniontown compressor station to 2.7 MMcf/d. While this capacity is higher than recent flows, it constrains an outlet for gas that would otherwise be able to travel southwest.”
July crude oil futures were up 58 cents to $68.30/bbl at around 8:50 a.m. ET, while July RBOB gasoline was trading about 2.0 cents higher to $2.1903/gal.
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June 02, 2021 at 08:06PM
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June Heat Helps Natural Gas Futures Hold Onto Gains Early - Natural Gas Intelligence
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