April Natural Gas Futures Limp Toward Expiry, Approach $2 Handle; Cash Prices Slide - Natural Gas Intelligence

April Natural Gas Futures Limp Toward Expiry, Approach $2 Handle; Cash Prices Slide - Natural Gas Intelligence
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April Natural Gas Futures Limp Toward Expiry, Approach $2 Handle; Cash Prices Slide

Beleaguered natural gas futures fell a second day, hampered again by robust supplies and weakening weather-driven demand. The April Nymex gas futures contract lost 5.8 cents day/day and closed at $2.030/MMBtu. May futures settled at $2.147, down 6.8 cents.

At A Glance:

- Front month loses 5.8 cents
- Demand poised to ease
- Supplies remain elevated

NGI’s Spot Gas National Avg. slipped 9.5 cents to $2.470.

Production held above 100 Bcf/d on Tuesday, on par with the start of the week and recent peak levels. At the same time, National Weather Service (NWS) forecasts Tuesday pointed to warmer conditions than in previous outlooks, with benign conditions expected across the South – and in some northern markets — late this week and next, minimizing demand.

“Thanks to heavy end-of-season natural gas supplies and little weather, Nymex natty bears showed no compunction to take money off the table before the quarter ends,” said analysts at The Schork Report.

The April contract rolls off the books with Wednesday’s settlement, when May becomes the front month. Trading into expiry is often choppy, noted Mizuho Securities USA LLC’s Robert Yawger, director of energy futures. He is watching for futures to test the sub-$2 level before that.

“There is a chance the roll can save natural gas from sliding over the $2 cliff” if May futures “can just hang in there until after” expiration, Yawger said.

Analyst Brian LaRose of ICAP Technical Analysis echoed that sentiment. “Watching intently for any signs that the bulls might be able to find their footing as we head into the end of the month,” he said.

In bulls’ favor, LNG feed gas demand on Tuesday hung around record levels near 13.9 Bcf/d, according to EBW Analytics Group. The firm cited the ongoing recovery of a key Texas liquefied natural gas export plant. Freeport LNG, forced offline in June following a fire, is in the process of building back to nearly 2.4 Bcf/d of capacity. Nominations at Freeport approached 1.6 Bcf on Tuesday.

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Asian and European calls for U.S. LNG are expected to hold strong and potentially surge ahead of next winter, given limited domestic supply sources on each continent. Europe, in particular, continues to grapple with long-term plans to fill the void left by diminished pipeline supplies from Russia amid the Kremlin’s war in Ukraine.

Stout Supplies

Following brief rashes of late-winter weather around mid-March, analysts expect a second consecutive bullish U.S. Energy Information Administration (EIA) storage print this Thursday.

Early draw estimates submitted to Reuters for the week ended March 24 averaged 55 Bcf. NGI modeled a draw of 57 Bcf. That compares with a five-year average decline of 17 Bcf.

EIA reported a withdrawal of 72 Bcf for the March 17 period. It compared with a five-year average decline of 45 Bcf. The decrease lowered inventories to 1,900 Bcf.

Still, even steep late-season storage pulls are unlikely to put a significant dent into surpluses relative to recent history. Stocks as of March 17 were far above the year-earlier level of 1,396 Bcf and the five-year average of 1,549 Bcf.

At the same time, the specter of economic recession threatens to curb industrial demand in the months ahead. The financial crisis created by the failures of Silicon Valley Bank and Signature Bank earlier this month – and the downfall of Credit Suisse in Europe – could force banks to pull back on lending. When businesses lack access to credit, spending falls and downturns are more likely, said Rupert Thompson, chief economist at Kingswood Group.

The banking sector “remained the center of attention and markets remained in a skittish mood,” Thompson said Tuesday. “The economic outlook remains murky to say the least and is set to remain so for a good few months.”

Soft Spot Prices

Physical prices mostly traded in a narrow range of gains and losses, depending on the region, but the national average swung lower on declines in the volatile West.

Malin shed 21.0 cents day/day to average $5.665, while PG&E Citygate fell 16.5 cents to $6.665 and Northwest Sumas dropped 75.5 cents to $2.995.

NWS data showed multiple weather systems tracking across the country during the current trading week, delivering chilly air to the Mountain West and northern reaches of the Plains. Some cooler temperatures are projected to drop further south, though this is likely to leave mild conditions from Texas to Florida.

For next week, forecasts show similar conditions permeating the United States.

Maxar’s Weather Desk on Tuesday said warmer-than-normal temperatures would span eastern portions of the Lower 48 for much of the following 15 days.

“At the peaks, temperatures are forecast in the upper-80s for Dallas and Houston on days seven and eight, mid-60s in Chicago on day eight and mid- to upper-70s in Washington, DC, from days eight through 10,” Maxar said.

Meanwhile, on the maintenance front, El Paso Natural Gas Pipeline said that, from Tuesday through the end of March, it would conduct cleaning and smart tool runs through its Line 1100 in Texas, cutting up to 94 MMcf/d of westbound flows.

Wood Mackenzie analyst Quinn Schulz noted that other maintenance projects and flow disruptions have hampered the delivery of gas from the Permian Basin to western markets, impacting supplies and putting upward pressure on spot prices in the Southwest and Southern California.

However, in the Southwest Tuesday, KRGT Del Pool lost 44.0 cents to $5.445, while SoCal Border Avg. fell 96.0 cents to $4.615.

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