July Natural Gas Contract Extended Rebound on Tuesday

In an EBW Analytics Group report sent to Rigzone by the EBW team today, Eli Rubin, an energy analyst at the company, said the July natural gas contract “extended its rebound to $3.722 yesterday, recovering nearly the entirety of last week’s losses to close within 0.3¢ of the Friday before Memorial Day”.

Rubin added in the report, however, that “exceptional Henry Hub spot weakness dragging prices to $2.82 (90¢ behind the front-month) reveals soft fundamentals and may restrain immediate term upside”.

The EBW analyst went on to state in the report that “DTN’s weather forecast is little changed, while other meteorologists suggest falling CDDs [cooling degree days] – impeding higher gas prices”.

“Corpus Christi LNG feedgas demand is rising, but extensive maintenance is lingering at Cameron and Sabine Pass,” he added.

“Still, production readings remain soft, technicals are bullish, and fundamentals will tighten over the next few weeks,” Rubin noted in the report.

“While very weak cash may temper bullish enthusiasm near term, if July can close above the 20-day average at $3.749 or the weather outlook heats up into late June, natural gas prices may race higher ahead of our most-likely scenario,” he said.

In a separate EBW Analytics Group report sent to Rigzone by the EBW team yesterday, Rubin said Monday’s 24.7¢ surge in the July contract “rapidly shook off growing pessimism and reset market technicals in a bullish direction”.

“However, the huge daily gain largely offset last week’s declines – and soft near-term physical markets may temper the attempt to break out higher in the immediate term,” he added.

In that report, Rubin said weather forecasts shifted milder over the past 24 hours, “with cool to seasonal weather in Texas and the Southeast into mid-June”.

“LNG feedgas is weak with two trains offline at Sabine Pass, the outage at Cameron, and weakness at Corpus Christi. Weather and LNG are likely to flip bullish within the next 30-45 days, and could raise prices anytime,” he continued.

Also in this report, Rubin said production nominations are sliding to open June, reinforcing support.

“The market is attempting to round the corner from a very loose spring injection season to a bullish structural summer outlook – but a weak Henry Hub physical market still below $3.00 may act as a short-term brake on (warranted) medium-term bullish enthusiasm,” he added.

In another report sent to Rigzone by the EBW team on Monday, Rubin noted that Henry Hub spot gas prices slid to a five-week low at $2.80 per million British thermal units (MMBtu) over the weekend due to mild weather, strong end of May production, and a three-train LNG maintenance outage.

“Weak cash may weigh on near-term futures into mid-June, but the gas market could price-in upside in anticipation of mid-summer tightening,” Rubin said in that report.

“The weekend’s modest bullish weather shift, retreat in production readings, and jump in Plaquemines LNG feedgas to 2.6 Bcfpd (outpacing market expectations) are spurring this morning’s reversal higher,” Rubin added, noting that “short-covering is amplifying upside”.

“Concluding maintenance at Cameron LNG may add back 0.8 Bcfpd of demand this week. The return of two trains at Sabine Pass may add 1.7 Bcfpd into late June,” Rubin said in that repot.

“Another midscale unit at Corpus Christi Stage 3 and LNG Canada may soon begin commissioning. Weekly cooling demand may jump 25 CDDs to add 4-5 Bcfpd of power burns by Week 3. Two more 100+ Bcf injections are likely, but natural gas may be rounding the corner into summer,” Rubin went on to state in the report.

EBW Analytics Group provides independent expert analysis of natural gas, electricity, and crude oil markets, the company’s site states.

Rubin is an expert in econometrics, statistics, microeconomics, and energy-related public policy, the site adds, noting that he is “instrumental in designing the algorithms used in our models, and in assessing the potential discrepancies between theoretical and practical market effects of models and historical results”.

To contact the author, email andreas.exarheas@rigzone.com