With LNG demand weakness countering a retreat in domestic production in updated estimates, natural gas futures continued to slide in early trading Wednesday.
Coming off a 3.9-cent sell-off in Tuesday’s session, the June Nymex contract was down another 6.2 cents to $1.929/MMBtu at around 8:45 a.m. ET.
Wood Mackenzie estimates put first-of-month production at 97.1 Bcf/d for Wednesday, down around 0.7 Bcf/d versus Tuesday’s output.
However, liquefied natural gas feed gas volumes were also down in the latest sample, dropping to 11.6 Bcf/d from 12.5 Bcf/d on Tuesday, Wood Mackenzie data show.
The June contract’s foray above the $2 threshold proved short-lived Tuesday as a pipeline notice may have fueled speculation over volumes flowing to the Freeport LNG terminal.
Gulf South Pipeline Co. LLC on Tuesday notified shippers that a customer had failed to take confirmed quantities at a delivery point associated with Freeport. Similar notices have been posted in recent weeks as flows to the Texas export terminal have fluctuated amid operational issues.
Wood Mackenzie flow data as of early Wednesday showed scheduled volumes through Gulf South’s Stratton Ridge (to Freeport LNG) delivery point increasing to near 500,000 MMBtu, up from around 220,000 MMBtu scheduled for Tuesday.
Recent selling could reflect skepticism around Freeport LNG volumes potentially being “overstated,” according to NatGasWeather. Storage surpluses and a mild 15-day forecast also represent bearish factors weighing on prices, according to the firm.
The temperature outlook remained steady overnight, with the pattern showing somewhat higher than normal cooling degree day (CDD) totals alongside lighter than normal heating demand, NatGasWeather said.
Overall weather-driven demand for natural gas is likely to “remain light until more intimidating heat builds,” according to the firm. “With that said, the expectation for late May is CDDs will gain in dominance as highs of 90s increase in coverage.”
Looking ahead to Thursday’s U.S. Energy Information Administration (EIA) storage report, inventory surpluses could trend marginally lower week/week. NGI is modeling a 56 Bcf injection for the period ending April 26, versus a five-year average injection of 72 Bcf.
For the year-earlier period, EIA recorded a 62 Bcf build. As of April 19, Lower 48 storage was 439 Bcf above year-earlier levels and 655 Bcf above the five-year average, EIA data show.
