Natural gas futures continued to lose ground early Thursday as milder-trending forecasts did little to repair the damage dealt by a material weakening in export demand expectations heading into next year.
After plunging 14.1 cents on Wednesday, the January Nymex contract was down another 3.2 cents to $2.537/MMBtu at around 8:30 a.m. ET.
Futures sold off sharply Wednesday following an update from ExxonMobil that pushed back the expected completion of its Golden Pass LNG terminal to late 2024, with first exports now expected in 2025.
“This is six months later than we had expected and likely a driver of the commodity underperformance” Wednesday, analysts at Tudor, Pickering, Holt & Co. (TPH) said in a note Thursday. “After following up with the company, we have now modeled Train 1 contributing 800 MMcf/d of gas demand beginning in January 2025.”
Alongside the revised Golden Pass timeline, Wednesday also brought a steep decline in crude oil futures, all part of a “catastrophic day across the global Btu value chain,” analysts at Mobius Risk Group observed.
A “remarkably uniform change” in prices across the strip from Winter 2023/24 into 2026 “and beyond” suggested the selling “was more a product of a material increase in producer hedging than a shifting fundamental market view,” the Mobius analysts said.
Whether prices recover some value following “such an aggressive and parallel move lower” will depend on the outcome of the latest U.S. Energy Information Administration (EIA) storage report, according to the firm.
For the agency’s 10:30 a.m. ET report, covering changes to Lower 48 stocks during the week ended Dec. 1, estimates have been pointing to a potentially triple-digit withdrawal that would easily outpace historical norms.
Estimates submitted to Reuters ranged from withdrawals of 97 Bcf to 126 Bcf, with a median draw of 105 Bcf. Bloomberg’s poll spanned estimates of a 102 Bcf draw to a 119 Bcf pull and produced a median 107 Bcf withdrawal. The average from The Wall Street Journal’s survey came out to a 110 Bcf reduction.
NGI modeled a 106 Bcf pull for the latest EIA report. The five-year average is a 48 Bcf withdrawal, while the year-earlier pull was 30 Bcf, EIA data show.
“From our perspective, it will be important to see if the cumulative withdrawal is greater than 100 Bcf and if the South Central draw is capable of exceeding 30 Bcf,” the Mobius analysts said. “If both of these bars are topped then it would certainly warrant some correction” to Wednesday’s move lower.
On the other hand, should the EIA report reveal a pull smaller than 85 Bcf in magnitude and a South Central draw under 20 Bcf, the market could find itself “heading towards the $2.00 mark faster than most anyone predicted,” according to Mobius.
Meanwhile, overnight forecast trends only added to the bearish pressure on prices, with both the American and European models shedding double digit heating degree days (HDD) from the outlook, according to NatGasWeather.
“Most important, the overnight data maintained warmer than normal temperatures gaining ground over much of the U.S. Dec. 16-21 as cold air becomes confined to far northern Canada,” NatGasWeather said. “Without cold air into western or southern Canada Dec. 16-21, there’s little chance U.S. weather systems are able to tap enough frosty air to impress.
“...The overnight weather data is likely too warm, but even if it were to add several HDD, it’s far from being bullish without massive colder trends.”
