April Natural Gas Called Slightly Higher Ahead of EIA Report; Euro Model 'Moderately Bullish' - Natural Gas Intelligence

April Natural Gas Called Slightly Higher Ahead of EIA Report; Euro Model ‘Moderately Bullish’ - Natural Gas Intelligence
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April Natural Gas Called Slightly Higher Ahead of EIA Report; Euro Model ‘Moderately Bullish’

Natural gas futures attempted to claw back some of their recent losses in early trading Thursday as the market awaited the latest government inventory data. After climbing above $2.500/MMBtu earlier in the hour, the April Nymex contract was trading at $2.456/MMBtu as of around 8:40 a.m. ET, up 0.6 cents.

The April contract plunged 13.4 cents day/day in Wednesday’s session, but the front month held key support at $2.38, EBW Analytics Group analyst Eli Rubin observed.

“While the weather forecast continues to grind higher and the storage surplus may soon peak, the most pressing near-term challenge for natural gas bulls may still be defending technical support and averting the risks of another leg lower as near-term cold within the seven to 10 window ebbs into the end of March and early April,” Rubin said.

There are signs of strengthening underlying fundamentals, according to the analyst. LNG feed gas volumes were seen approaching the 13.8 Bcf/d mark Wednesday, while recent production nominations “point to lower output early this week across the South Central,” Rubin said.

The market will gain more insight into the supply/demand balance during the period ended March 10 after the Energy Information Administration (EIA) reveals its latest weekly natural gas storage report at 10:30 a.m. ET.

NGI modeled a withdrawal of 64 Bcf. The five-year average for the period is a pull of 77 Bcf, while last year saw a 86 Bcf draw for the week.

Major surveys produced withdrawal estimates ranging from 49 Bcf to 76 Bcf. Bloomberg’s poll landed at a median draw of 63 Bcf, while a Reuters survey found a median expectation of 61 Bcf. The Wall Street Journal’s survey produced an average draw estimate of 62 Bcf.

“Although the dominant trend over the past two months has favored larger draws,” it’s potentially more significant to the market that this week’s report signals “the arrival of a long-awaited peak in swelling storage surpluses,” according to Rubin.

Temperatures during the latest EIA report period were much warmer than normal over southern and eastern portions of the country, with cooler conditions reserved for the West and Northern Plains, according to NatGasWeather. The firm said it modeled a 59 Bcf draw.

Overnight forecast trends were mixed, with the American model trending warmer, NatGasWeather said. The European dataset, meanwhile, “was warmer the front eight days but colder trending March 26-30, offsetting for no change.”

The European data was notably colder than its American counterpart in the latest runs, a “sizeable difference” that will need to be resolved, the firm said.

There’s a concern the European model “is too cold and has potential to shed demand” to better align with the American model outlook, NatGasWeather said. “But for now,” the European data “is still moderately bullish overall the next 15 days, and that could be reason if prices were to find strength.”

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