Natural gas prices near a 25-year low on Thursday morning as the summer heat has yet to materialize, and oversupplied conditions persist.
August NatGas futures slid 2% to 1.612 MMBtu on Thursday morning, weighed down by the lack of heat-driven demand and continued LNG weakness.
The summer heat has taken hold across most of the Lower 48, leading to stronger power burns. But futures markets have looked for indications of extreme temperatures to drive lofty cooling demand and offset the shocks of the coronavirus pandemic and the global recession it induced.
Weather models have, so far this week, instead produced modestly cooler outlooks than what forecasters had projected over last weekend, leaving markets to focus on simmering LNG challenges and the effects of overall demand destruction inflicted by the pandemic despite governments lifting restrictions on businesses and consumers.
"After cooler trends the past few days for early next week, the data was back a little hotter, but still with several weather systems preventing impressive or widespread heat," NatGasWeather said in a Wednesday afternoon forecast. Data also "trended cooler for the Fourth of July weekend" with weather systems over the eastern U.S. set to prevent upper high pressure "from getting quite as strong as previous runs." - Reuters Commodity Desk
US Lower 48 - 45-day cooling degree day
A NatGas analysis of Bloomberg data showed gas production increased over 87 Bcf/d this week amid reports of production returning as oil drilling resumed. The data also showed the U.S. crude production hit 10.5 million b/d on June 12, has since rebounded to 11.0 million b/d on June 19. The all-time-high in production was reached on March 13 at 13.1 million b/d. The virus-related downturn in the economy has led to a collapse in energy product demand, resulting in a historic drop in oil rigs shuttering operations.
As for LNG exports, here's what Reuters said:
At the same time, LNG export levels hover near 4.0 Bcf/d, up from recent lows but still soft, as demand from formerly reliable destinations in Europe and Asia remains anemic due to slow economic recoveries and modest industrial energy needs. The threat of a virus resurgence also weighs on demand. In the United States, the rate of increases in Covid-19 cases has accelerated in June amid the reopening of local economies, with several states, including Texas and Arizona, reporting daily record highs this month, according to Johns Hopkins University data.
"While further progress on treatments and vaccines for Covid-19 could lead to added confidence on lifting of lockdowns … these are unpredictable times," shipbroker Fearnleys AS said. As such, LNG sentiment remains "flat."
Expectations for today's U.S. Energy Information Administration (EIA) NatGas report will likely result in continued builds for the week ending June 19.
The U.S. Energy Information Administration (EIA) on Thursday is set to issue its storage report for the week ended June 19. A Bloomberg poll found injection estimates ranging from 100 Bcf to 114 Bcf, with a median of 108 Bcf. A Wall Street Journal survey produced an average build expectation of 105 Bcf, while a Reuters survey of 17 analysts produced a 90 Bcf to 115 Bcf injection range and a median 106 Bcf injection. NGI estimated a 116 Bcf build. - Reuters
To offset coronavirus demand loss - extreme heat in the US Lower 48 is needed this summer- if that doesn't happen - NatGas prices will continue moving lower.
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