July Natural Gas Set to Open Lower as More Cooling Shows up in Overnight Forecasts
8:57 AM
Nymex July natural gas prices were set to open nearly 4 cents lower at $2.892 Friday morning as overnight weather forecasts cooled dramatically for the June 15-18 time period. Read More
An analysis of weather forecasts, the economy, consumer demand, and production and storage of natural gas points to neutral price pressure this summer, according to the Natural Gas Supply Association (NGSA).
"Our expectation for flat price pressure is based on a forecast for tremendous growth in demand that is matched by even more impressive growth in production," NGSA said in its 2018 Summer Outlook for Natural Gas, which was released Thursday.
More from the article:
"NGSA expects record demand this summer to be "fueled by record growth in electric sector demand for natural gas due to massive natural gas-fired generation additions since last summer, along with temporary coal-to-gas switching" that together will add up to a 10% increase in demand from the sector compared with summer 2017. Demand from the residential and commercial sectors is expected to increase by 7% and industrial demand is expected to increase slightly as well.
At the same time, liquefied natural gas exports will increase 1.6 Bcf/d compared with last summer, and exports to Mexico will increase 0.5 Bcf/d, according to NGSA forecasts.
"When all sectors are combined, overall demand is projected to be more than 6 Bcf/d (9%) greater than the summer of 2017 and thus to place upward pressure on natural gas prices compared to last summer," NGSA said.
But that upward pressure will be met by production that "is projected to smash through previous robust levels," placing nearly equal downward pressure on prices.
In an assessment of energy markets released earlier this month, FERC said demand for gas from power generators may approach record highs this summer.
The Energy Information Administration (EIA) is forecasting natural gas power burn will average 35.16 Bcf/d in June, July and August, just 0.3 Bcf/d less than the record high set in summer 2016 and 3 Bcf/d higher than last year, according to the Federal Energy Regulatory Commission analysis.
Using data from EIA and Energy Ventures Analysis, NGSA analyzes factors that place upward or downward pressure on natural gas prices, but does not forecast actual prices. In addition to the influence of demand and production, NGSA said expected higher gas injections into storage would place upward pressure on prices this summer, economic factors including steady growth in gross domestic product would bring neutral pressure, and weather conditions including temperatures expected to be 5% cooler than summer 2017 would produce downward pressure.
Wild card factors that could play a hand in summer natural gas prices include "an unpredicted and very active hurricane/storm season...which would mainly affect demand, since most onshore producing gas fields are not vulnerable to hurricanes," NGSA said."
Looking at the price of natural gas at longer and longer time frames gives one a different(wider) perspective...........now if you are a day trader.........who cares (-:
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NWS guidance for the extended range from GFS ensembles is pretty cool/bearish.
This is one (of many) time that I would not be betting the farm on it:
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8-15 day period below
Mike,
From what I've seen, the GFS ensembles have tended to have a bit of cool bias.
I believe you.
The NWS came out cool in the same spots the GFS ensembles had it. From the weather thread:
The NWS extended forecast just out was about as expected in the sneak preview earlier:
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Also passing along this from the weather thread. Temps this Summer will be HUUUUGE to natural gas prices:
The experimental week 3 and week 4 forecast came out interesting. Hot for much of the country, especially west and turning dry again from the S.Plains to W.Cornbelt(areas with worst drought right now-which is part of why they went in that direction)
In the Summer, odds of hot and dry in any location are elevated if that area is in drought..............given whatever weather pattern is in place.
If the extended guidance has a 50% chance of rain over an area that is bone dry.............you can reduce that to 20%, depending on the pattern.
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Some of the intense heat in the S.Plains will still out into the SW Cornbelt over the next few days.
Nothing too extreme or that hasn't been known all week..
These day 3 highs are for Monday but this is Friday.
This map will change everyday, so on Sunday, it will be the Wednesdays highs(day 3 then)
Mike,
Also, the operational GFS has tended during summer to have a small warm bias on average despite the ensembles having the cool bias. I've often seen very hot small pockets in cities during the afternoon (I mean like 10+ hotter immediately surrounded by much cooler) in the SE US that are unrealistic.
I noticed that at times too Larry.
Closing comments from Natural Gas Intelligence:
Breaking Heat, Light Weekend Demand Send Nymex, Spot Gas Lower
5:33 PM
July natural gas futures retreated ahead of the weekend as cooler trends showed up in overnight model runs and again in midday Friday runs. Spot gas prices also declined even as near-term ridging was expected to send temperatures in the eastern U.S. soaring well above normal, albeit very temporarily. The NGI National Spot Gas Average slid 10 cents to $2.51/MMBtu.