A hotter shift in forecasts over the holiday weekend, including toasty June temperatures in key demand regions in the Midwest and East, helped propel natural gas futures sharply higher in early trading Tuesday. The July Nymex contract was up 7.2 cents to $3.058/MMBtu at around 8:50 a.m. ET.
Over the weekend, forecasts trended “notably hotter” by showing additional heat for the Midwest and East in the six- to 10-day time frame, according to Bespoke Weather Services. This includes projected high temperatures of 90 degrees or above as far north as Minneapolis and Boston, the firm said.
This would increase national gas-weighted degree days (GWDD) “to near-record levels on at least a couple of days early next week, despite the fact that the West cools off after the next few days, and we have no notable heat (relative to normal) in Texas and much of the South,” Bespoke said.
Assuming Tuesday’s forecast holds, near-normal temperatures during the back half of June would be enough to make this month one of the hottest on record in terms of GWDD, according to the firm.
Recent Energy Information Administration (EIA) storage reports have suggested looser balances, “but with this much demand in the forecast, thanks to the hot pattern, it is difficult to argue for a notable move lower in prices,” Bespoke said. “Obviously, if we see changes in the forecast, and the heat backs off, that is a different ballgame.”
Looking at the updated supply picture, analysts at Wood Mackenzie noted a 2.3 Bcf/d day/day decline in Lower 48 output in their daily pipe production reporting as of early Tuesday.
“Approximately 1.0 Bcf/d of this decrease is coming from the Northeast, mainly concentrated (about 800 MMcf/d) from Northeast Pennsylvania,” Wood Mackenzie analysts Nicole McMurrer and Laura Munder wrote in a note to clients. “It is important to note that today is the first of the month, when we usually see large daily declines in the morning followed by significant revisions the following day, usually near 1 Bcf/d.”
The drop does, however, coincide with pipeline maintenance in the region on the Tennessee Gas Pipeline system, which would account for about 365 MMcf/d of the observed decline, according to the analysts.
“This maintenance event is only expected to last for today and tomorrow’s gas day, with a much smaller impact estimated for tomorrow’s work,” they said.
Meanwhile, looking ahead to this week’s EIA storage report, NGI’s model is calling for a 95 Bcf injection into U.S. gas stocks for the week ended May 28. That would compare with a 103 Bcf injection recorded for the year-ago period and a five-year average build of 96 Bcf.
July crude oil futures were up $2.29 to $68.610/bbl at around 8:50 a.m. ET, while July RBOB gasoline was up about 5.9 cents to $2.195/gal.
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June 01, 2021 at 08:08PM
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June Temps Trend 'Notably Hotter' Over Long Weekend as Natural Gas Futures Surge - Natural Gas Intelligence
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