Natural gas futures rose but treaded lightly to kick off the week’s final session, as traders weighed an improving storage trajectory against signs of fading demand.
Coming off back-to-back gains, the October Nymex gas futures contract was up 2.5 cents to $2.162/MMBtu as of 8:40 ET on Friday. However, the prompt month was seesawing in a narrow range early.
Futures found support this week from a bullish U.S. Energy Information Administration (EIA) storage report relative to historical norms. The agency posted a 35 Bcf injection for the week ended Aug. 23. It compared with a five-year average increase of 43 Bcf.
Working gas in storage climbed to 3,334 Bcf, EIA said. Still, the surfeit of stockpiles relative to the five-year average declined by a percentage point to 12%. It gradually moved lower through the summer.
“Compared to degree days and normal seasonality, this week’s report is 4.7 Bcf/d tight versus the prior five-year average,” said Wood Mackenzie analyst Eric McGuire. “This is a tightening of 0.6 Bcf/d week-over-week. The previous five weeks averaged 3.3 Bcf/d tight.”
Another bullish result may lie ahead following lower production and strong heat in the final week of August, he said. Early estimates submitted to Reuters for the week ending Aug. 30 ranged from injections of 22 Bcf to 49 Bcf, with an average increase of 34 Bcf. The prior five-year average increase was 51 Bcf.
Elsewhere, fundamentals were mixed.
With maintenance events this week in Appalachia and the Permian Basin, production held below recent averages late this week. Wood Mackenzie estimated output at 101.6 Bcf/d on Friday, off from the seven-day average of 102.2 Bcf/d.
EBW Analytics Group’s Eli Rubin, however, said “pipeline nomination patterns often suggest higher flows into the end of the month,” meaning production readings could climb over the weekend and renew supply/demand imbalance concerns.
What’s more, Rubin said, weather forecasts point to “a moderately bearish demand outlook for natural gas” and “power sector gas burns could tumble 10 Bcf/d” next month.
Weather-driven cooling demand proved strong through most of the current trading week, but it was poised to moderate in the first couple weeks of September, according to National Weather Service data. Comfortable highs in the 70s were forecast to canvas many northern markets.
Meanwhile, NGI data showed LNG demand began to recover from a midweek low near 11 Bcf/d after a brief outage at the liquefied natural gas facility in Freeport, TX. Freeport LNG reported a false fire alarm on Wednesday. Feed gas flows to export facilities overall topped 12 Bcf/d ahead of Friday trading.
