Natural gas futures were up early Friday and headed toward a fourth consecutive day of gains as traders digested a bullish storage print, lighter production estimates and a looming heat wave.
Coming off a 1.5-cent gain the prior day, the September Nymex gas futures contract was up 3.8 cents to $2.165/MMBtu at around 8:45 a.m. ET.
National Weather Service (NWS) data showed mild weather across northern markets extending into early next week. Former Hurricane Debby, meanwhile, continued to deliver drenching, cooling rains along the East Coast on Friday.
However, as Rystad Energy analyst Christoph Halser noted, NWS forecasts for the second half of August advertised a return to above average temperatures across the Lower 48. The outlook “paints a bright picture for gas demand,” he said.
Halser also noted that LNG demand held steady and above 12 Bcf/d through most of this week, while production declined amid a rash of maintenance projects in Appalachia, the Permian Basin and the Rockies.
Wood Mackenzie estimated production at 100.4 Bcf/d on Friday, down from a prior seven-day average near 102 Bcf/d. It projected liquefied natural gas demand would average 12.4 Bcf/d over the coming week.
The combination of lighter natural gas output this week and stronger heat later in August could support further bullish storage prints after this week’s anemic result.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 21 Bcf into storage for the week ended Aug. 2.
Prior to the report, estimates submitted to Reuters landed at a median of 26 Bcf. NGI modeled a 30 Bcf increase. The EIA result was far below the five-year average build of 38 Bcf.
It marked a second consecutive bullish build and narrowed a long-running surplus to the five-year by a percentage point to 15%. Prices spiked several cents after the EIA data crossed the wires on Thursday.
“I do think that the jump in price has more to do with the lower storage injection than anything else,” Paragon Global Markets LLC’s Steve Blair, managing director of institutional energy sales, told NGI.
Blair said traders are watching production data closely. While this week’s lighter readings were attributed to maintenance work, he said, any sustained decline in output could bolster prices. A return to widespread heat in the second half of August, he added, could drive enough upward momentum on the demand side to also spur further rallying.
