Above Normal July Temperatures Failing To Find Buyers

Written by on July 15, 2020 in NatGasWeather - No comments

Wednesday, July 15:   Aug’20 nat gas futures closed 1¢ higher Tuesday at $1.75.  The overnight GFS model was little changed, losing 1-2 CDDs.  The European model lost 3 CDD’s but was still quite hot and again hotter versus the GFS model by more than 10 CDD’s.  No change overall as they both forecast a solidly hotter than normal overall US pattern through the end of July.  Sure, it’s not quite as hot as the data showed last week, but hotter than normal nonetheless with national demand stronger than normal for smaller builds to come.  Of course, it would be more intimidating if not for surpluses at 450 Bcf, supplies over 3.1 Tcf, and LNG feedgas at only 3.0-3.5 Bcf/day.  It’s been up to the nat gas markets to decide if the 15-day forecast is hot enough to warrant higher prices, and so far, major players haven’t shown much interest in bidding up prices.  We expect today’s trade could be telling to if weather can finally move the needle or not.
 

As far as details, very hot highs of upper 90s to 115°F continues from California to Texas, while uncomfortable mid-90s and humid conditions covers the S. Plains, South, and Southeast for strong regional demand.  But with a cool front pushing through much of the Midwest the next few days with highs of 70s to lower 80s, national demand isn’t quite as impressive as once advertised.  Hot high pressure will expand to include the Great Lakes and Northeast late in the week into next week with highs into the low 90s stretching from Chicago to NYC, while also hot with upper 80s to 100s over the rest of the US besides the N. Plains for very strong national demand.  Hot upper high pressure is expected to continue to rule much of the US next week with widespread highs of upper 80s to 100s besides portions of the far northern US for steady strong demand.   After July 27-28 is where the weather data diverges as one camp keeps a solidly hot pattern in place for most of the US, while a second camp shifts the hot upper ridge over the west-central US, thereby allowing more comfortable conditions into the northeastern US.  Either way it’s still a rather hot US pattern, it would simply be more bullish if heat held over the East.  We expect the hot ridge to dominate much of the US into early August.
 

For today’s trade, we look to see if bulls are able to gain any momentum on what is still a rather hot 15-day forecast.  The failure for prices to find support on above normal July heat would seem concerning for the bulls.

Friday-Monday Pattern

 

Wednesday: The overnight GFS model was little changed, losing 1-2 CDDs. The European model lost 3 CDD’s but was still quite hot and again hotter versus the GFS model by more than 10 CDD’s. No change overall as they both forecast a solidly hotter than normal overall US pattern through the end of July.

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