Weather Forecasts Impacts U.S. Gas Futures

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Coronavirus Demand Impacts, Milder Overnight Forecasts Send Natural Gas Futures Lower

Coronavirus Demand Impacts Still Looming as LNG Exports Rebound; Natural Gas Futures Called Lower

Coronavirus Demand Impacts in Focus as Natural Gas Futures Slump Early

With coronavirus demand impacts continuing to weigh on the market, and with the latest forecasts shedding weather-driven demand, natural gas futures were trading slightly lower early Tuesday. The April Nymex contract was down 2.0 cents to $1.795/MMBtu at around 8:30 a.m. ET.

The downward pressure on natural gas prices this week likely stems of expectations for widespread coronavirus containment measures to destroy demand, NatGasWeather said. As for the latest weather data, the forecaster noted a drop in heating demand expectations overnight from the American and European datasets but with “no major changes” to the overall pattern.

“As is, it would take colder trends for next week and beyond for the pattern to be considered cold enough, though still with just enough demand across the northern U.S. to be considered seasonal,” NatGasWeather said. “But with the overnight data losing a little demand, the natural gas markets could notice.”

Energy Aspects recently updated its end-March storage carryout projection to 1.99 Tcf, with near-term fundamentals remaining relatively steady over the past week despite the volatility in markets.

“The present set of fundamentals does not currently support” the $1.90/MMBtu-plus pricing that was observed last week, Energy Aspects said. “There are risks to lower demand stemming from even greater congestion issues” in the global liquefied natural gas market, as well as “uncertainties linked to the spread of Covid-19 and its impact on demand.

“In addition, impacts to domestic demand including industrial demand and the power sector cannot be ruled out. To be fair, weaker crude prices, if sustained, would have a real bearing on associated production volumes, but that move would really begin to take hold later in 2020 and then in 2021.”

Meanwhile, the broader economic turmoil — major disruptions to daily life, a jittery stock market — has been hard to ignore.

“History is being made before our eyes — and, alas, not in a good way,” Raymond James & Associates analysts said in a note to clients early Tuesday. “The S&P 500 continued its wild swings on Monday, down 12% following its 9.3% gain on Friday. The sell-off marks the S&P’s largest one-day drop since 1987.”

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WIth crude prices also down sharply, “energy stocks followed the commodity downwards,” they said.

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Weather Forecasts Impacts U.S. Gas Futures

By Lex Yaranu | Wednesday, July 22nd, 2020

Weather usually has a big impact on some prices, and in the case of gas it’s often possible to predict when usage will wane or peak. In the last week natural gas prices recovered from a fall-back last session. Market players appear to feel more confident based on assessments of the U.S. demand and supply levels increasing with the soaring temperatures.

Looking at updated weather forecast models it’s clear that large parts of the U.S. will see higher than average temperatures until late in the last week of the month. Market watchers know that natural gas is behind over a quarter of America’s electricity generation. The demand for natural gas generated electricity will rise and fall according to the use of air conditions. In the southern part of the U.S. some cities are experiencing difficulty keeping up with demand as air condition creates a greater demand.

The effect on the market is quickly visible as earlier this week natural gas lost 4.7 cents falling to $2.83 at the close. But now the futures are forecasted to support $2.776 starting July 17 th , and resistance at $2.944 at the high. This is a change reflecting the weather patterns as last week’s weather across the U.S. was much milder.

At the present time natural gas storage stands at almost 3 trillion cubic feet. This is almost 31% higher than for mid-July of 2020. It’s also just under 3% above the five-year-average.

Temperatures could increase into the three digits for the Midwest, even into the northern part of the country as the summer continues. With storage low, and temperatures climbing the public still isn’t likely to see any trouble yet. An increase in billing is sure to follow this spike in use, but it’s unlikely that supply will be too low to fill the demands of users.

On July 23, the next report of Energy Information Administration is slated for release. It is expected that storage will demonstrate an increase at around 71 billion cubic feet on the weekend of July 17.

As the five-year average change with a spike of 53 billion cubic feet, there was an increase in supplies by 92 billion cubic feet in the same week last year. Moreover, crude oil set for September delivery advanced to 0.25% or 12 cents, selling at $50.55 per barrel. On the other hand, heating oil for delivery in August inched up by 0.19%, selling at $1.661 a gallon.

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