After inching higher most of the session on Friday, natural gas futures plunged into the close to finish lower for the day. The selling was intense but not enough to take out the Monday’s multi-month low at $1.742. The fundamentals remain bearish, which means any rallies are likely to be fueled by short-covering rather than aggressive buying and likely to be sold.
On Friday, July natural gas futures settled at $1.782, down $0.040 or -2.20%.
Natural Gas Intelligence (NGI) reported that spot gas prices also declined as Tropical Storm Cristobal headed toward the Gulf Coast, with winds and heavy rains from the storm seen slashing demand, but not threatening oil and gas operations. NGI’s Spot Gas National Average fell 11.0 cents to $1.555.
NatGasWeather Sees ‘A Very Warm Pattern’
Not much changed overnight in the background state for natural gas, with weather models still showing “a very warm pattern” into the second week of June, pushing power burns to a relatively strong 35-37 Bcf/d, according to NatGasWeather as reported by Natural Gas Intelligence. However, the June 11-17 pattern isn’t hot enough except across the Southwest and Texas as weather systems track across the northern and eastern United States, the firm said.
The June 18-21 period is now the period of greatest interest to see if the upper ridge finally can get “hot enough to intimidate,” and the latest Global Forecast System and latest European models showed a little hotter risks. “Whether this sticks and whether it trends hot enough to impress would need more data come on board, but the latest European model data did tease something finally more impressive around days 13-16 of the forecast,” NatGasWeather said.
National Hurricane Center Update
In the National Hurricane Center’s (NHC) Friday afternoon update, Cristobal’s forecast track had the storm moving back over the southern Gulf of Mexico late Friday, over the central Gulf of Mexico on Saturday, and near the northern Gulf Coast Sunday evening. Cristobal’s maximum sustained winds near 40 mph with higher gusts, and some additional strengthening was forecast.
All eyes will be on Tropical Storm Cristobal this weekend. If the storm forces the shutdown of production facilities then we could see a technical bounce higher on Monday. The size of the bounce will be determined by the degree of the shutdown.
If the storm passes the key production areas without incidence then prices could nonetheless firm because of early concerns over the return of warmer weather. I don’t think there is going to be an extended rally until the forecasters put the words and phrases “Hot”, “Prolonged” or “Wide-Area” into the forecasts.
Also lending possible support is the idea that this weekend’s heat in the North from Chicago to Washington D.C., could temporarily stall the recent run of triple-digit storage injections.
Read More: Natural Gas Price Fundamental Daily Forecast