Natural gas futures advanced in early trading Monday as forecasts over the weekend increased heat expectations for the eastern Lower 48 to close out the month of August. The September Nymex contract was up 6.4 cents to $3.915/MMBtu at around 8:50 a.m. ET.
Based on hotter forecast trends over the weekend, the latest Bespoke Weather Services projections showed a “notable bump up” in gas-weighted degree days (GWDD). The change was focused on hotter trends in the eastern half of the country over the next seven to 10 days, according to the firm.
“Heat drops off closer to normal levels as we move into early September, though the La Nina state suggests the bias of the pattern remains toward the hotter side more often than not as we move forward,” Bespoke said.
The weather data had been stable over the weekend prior to Sunday, analysts at EBW Analytics Group said. A “much warmer” turn from the European model then extended projected warmer-than-normal temperatures through Friday of next week, according to the firm.
“While these gains are partially offset by a rise in natural gas production and drop in” liquefied natural gas feed gas demand, the September contract “could retest resistance again later today or tomorrow,” the EBW analysts said. “With summer demand still expected to start falling after this week, though, and then decline even more rapidly” in early September, “the upside potential for this morning’s rally most likely is limited.”
Bespoke similarly observed “notable gains” in Lower 48 production over the weekend, with output reaching an estimated 92.5 Bcf/d.
“This still does not get us to 2021 highs, however, which we would like to see in order to feel a little more comfortable with the storage situation,” Bespoke said. Even though the higher output still doesn’t fully alleviate storage concerns heading into the winter, “we are a little surprised the market shrugged off the production gain so easily.”
Looking ahead to Thursday’s Energy Information Administration (EIA) storage report, Bespoke said it’s expecting a “significantly tighter” number compared to last week’s print.
“The re-tightening in the data may just be enough to make a run back toward $4.00 into September expiration” later this week, according to the firm.
NGI’s model is predicting a 37 Bcf injection for the upcoming EIA report, which covers the week ended Aug. 20. Last year, EIA recorded a 36 Bcf build for the similar week, while the five-year average is a 53 Bcf injection.
October crude oil futures were up $1.98 to $64.12/bbl at around 8:50 a.m. ET.
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August 23, 2021 at 08:04PM
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Natural Gas Futures Rally Early on 'Notable' Weather-Driven Demand Gains Over Weekend - Natural Gas Intelligence
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