Weekend Forecasts Colder-Trending as Natural Gas Futures Climb Early - Natural Gas Intelligence
Weekend Forecasts Colder-Trending as Natural Gas Futures Climb Early - Natural Gas Intelligence
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Weekend Forecasts Colder-Trending as Natural Gas Futures Climb Early
Natural gas futures probed modestly higher in early trading Monday following colder adjustments to forecasts over the weekend, though analysts continued to see signs of underlying looseness in the supply/demand balance.
The May Nymex contract was up 9.3 cents to $2.104/MMBtu at around 8:45 a.m. ET.
Weather models trended somewhat cooler over the weekend, with the colder adjustment focused around a weather system expected to track across the northern United States from April 17-20, according to NatGasWeather.
“However, the weekend data held exceptionally light demand the next seven days while also showing a light demand pattern returning April 21-24,” NatGasWeather said.
Based on forecasts and recent balances, the Lower 48 storage surplus to the five-year average is likely to sit at near or above 350 Bcf into early May, according to the firm.
“Thereafter, colder than normal patterns will be out of time, and for weather patterns to be viewed as bullish, it will require widespread hotter than normal temperatures,” NatGasWeather said.
Following a 23 Bcf withdrawal reported for the week ending March 31, Lower 48 stockpiles stood at 1,830 Bcf, or 298 Bcf (plus 19.5%) above the five-year average, according to EIA.
Adjusting for weather, last week’s EIA print implied the market was around 4 Bcf/d oversupplied, versus an oversupply of more than 5 Bcf/d in the week-earlier period, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
The TPH analysts highlighted fuel switching in the power sector as a key factor to monitor with front month prices languishing at discount levels.
“With Henry Hub having largely re-traced prior lows, the level of coal-to-gas switching has remained topical for hints on potential downside protection via demand, excluding LNG,” the TPH analysts said.
Data over the weekend showed the share of natural gas in the thermal stack climbing to around 73% after averaging 70% through March, according to TPH estimates. This would drive an incremental 2.5 Bcf/d of demand compared to earlier in the year, when natural gas’ share of the thermal stack sat at around 67%, the firm said.
Still, despite higher levels of coal-to-gas switching and supportive liquefied natural gas export volumes, “the market has remained loose on a weather-adjusted basis, with more supply on the come, in our view, despite the significant decline in the 2023 curve,” the TPH analysts said.
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