Natural gas futures trended higher early Tuesday but gave back most gains as the market considered lingering heat against an impending fall cooldown and a tighter supply/demand balance.
Coming off the Labor Day weekend, the October Nymex gas futures contract was less than a penny higher at $2.128/MMBtu as of 8:40 a.m. ET on Tuesday. The prompt month traded as high as $2.202.
Futures found early support from the unrelenting summer heat, which is expected to spread from the north-central region to the West through the week, driving strong weather-related demand.
The National Weather Service (NWS) said temperatures Tuesday were expected to reach into the upper 90s in the north-central region, particularly the northern High Plains. Heat was forecast to ease into the low to mid-80s Wednesday.
However, a strong ridge was expected to settle over the West Coast. NWS said temperatures were beginning to climb into the upper-90s and low 100s over interior California and up to the 110s in the Desert Southwest. Readings were forecast to soar into the 100s over interior California and into the 90s in the Pacific Northwest beginning Wednesday.
Elsewhere, most of the eastern United States., outside of the South, was expected to be dry with generally mild temperatures. Early fall-like highs in the 70s were forecast throughout New England, the Mid-Atlantic and the Carolinas.
Meanwhile, the National Hurricane Center was monitoring two tropical disturbances with less than a 40% chance of developing this week. NHC said environmental conditions were expected to become more conducive for a system churning in the Caribbean. The system was advancing and expected to reach the southwestern Gulf of Mexico by the weekend; a tropical depression could form.
“Essentially, weather patterns aren’t quite hot enough to be considered bullish” this week or next, NatGasWeather said. Temperatures are more likely to be “viewed as neutral, if not a touch bearish.”
However, eyes were also on natural gas output. Some producers, including the No. 1 U.S. natural gas producer EQT Corp., pledged to maintain curtailments through the fall. Wood Mackenzie estimated output at 101.1 Bcf/d Tuesday, off from the recent seven-day average of 102.0 Bcf/d.
EBW Analytics Group senior analyst Eli Rubin said, “The saving grace for bulls could be a step-change in production curtailments over the next seven-10 days.” However, headwinds remain.
“Stagnating progress in reducing storage surpluses and the looming in-service of the 2.5 Bcf/d Matterhorn pipeline in the Permian, and Cove Point LNG’s upcoming seasonal outage, may keep the October contract suppressed until a clearer storage trajectory into the end of the injection season emerges,” Rubin said.
The natural gas storage overhang slipped last week after the U.S. Energy Information Administration (EIA) reported 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 excess stockpiles relative to the five-year average declined by a percentage point to 12%. Storage gradually moved lower through the summer.
Another bullish result may lie ahead following lower production and strong heat in the final week of August. Early storage 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.
On the liquefied natural gas front, feed gas deliveries to U.S. LNG facilities were estimated at 12.6 Bcf/d Tuesday, a few ticks above the 12.4 Bcf/d seven-day average, Wood Mackenzie data showed.
