A drop in cooling demand expectations over the extended weekend, set against a backdrop of a prolonged outage at a major U.S. export facility, saw natural gas futures extend their losses in early trading Tuesday.
Coming off a 52.0-cent plunge back on Friday, the July Nymex contract was down another 26.0 cents to $6.684/MMBtu at around 8:50 a.m. ET.
Forecasts made a “significant shift away from high heat” over the holiday weekend, with moderating temperatures expected to bring cooling demand toward normal levels for the end of June into early July, according to Bespoke Weather Services.
The price drop as of early Tuesday “may seem excessive just based on what could wind up a short-term weather change,” but “we must consider that strong weather is what was necessary to negate the massive impact” of the extended outage at the Freeport liquefied natural gas (LNG) terminal, Bespoke said.
Absent strong summer heat, the market would be on a “much safer” trajectory for end-of-season storage levels, the firm said.
“This weather shift is not what we were expecting to see, and even if it winds up just temporary, prior to re-heating down the road, we want to see evidence of that before taking a bullish lean again,” Bespoke said.
With demand from the Freeport terminal offline for months, the strength in cooling demand had been serving as “the last key pillar of fundamental support,” EBW Analytics Group senior analyst Eli Rubin said.
Factoring in the loss of cooling demand compared to Friday’s expectations, Rubin said the “most likely” end-of-October storage level had grown to “comfortably north of 3,500 Bcf.”
“LNG demand climbed back to 11.2 Bcf/d on strength from Calcasieu Pass and Sabine Pass, and dry gas production has edged lower 0.5 Bcf/d since Freeport went offline — lending modest support,” the analyst added.
Meanwhile, ICAP Technical Analysis analyst Brian LaRose said that after the July contract made “fresh lows” the question heading into the new trading week will be “just how low do we go?
“At this time I prefer to err on the conservative side, so just looking to the ratio retracements associated with the $3.876/3.536 low and the typical moving averages,” LaRose said. “That makes $6.770-6.660, $6.365 and $6.087-5.877 the next set of support candidates we will be focusing our attention on.”
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June 21, 2022 at 08:16PM
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Natural Gas Futures Extend Losses as Weekend Forecasts Lower Cooling Demand - Natural Gas Intelligence
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