Expiring April Natural Gas Contract Tests Sub-$2 Early as Weather ... - Natural Gas Intelligence

Expiring April Natural Gas Contract Tests Sub-$2 Early as Weather Patterns Underwhelm - Natural Gas Intelligence

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Expiring April Natural Gas Contract Tests Sub-$2 Early as Weather Patterns Underwhelm

Weighed down by a healthy storage cushion as the market exits the withdrawal season, natural gas futures continued to grind lower in early trading Wednesday.

The expiring April Nymex contract was down 3.9 cents to $1.991/MMBtu at around 8:40 a.m. ET. May was off 2.2 cents to $2.125.

Natural gas prices have been “tempting the sub-$2 range” amid a combination of mild weather and “steady” production levels, a continuation of trends that have persisted throughout the winter heating season, Rystad Energy analyst Emily McClain said in a research note.

“Though some cold days are projected in the weeks ahead for the Pacific and Mountain regions, the short-term weather outlook signals near-normal temperatures over the next two weeks — subjecting gas to lighter demand conditions in the first two weeks of April,” McClain said. “Mild weather has helped to support low storage pulls throughout the withdrawal season, pushing gas inventories more than 20% above the five-year average for the week ending March 17.

“While we expect this week to show another minimal withdrawal, storage injections should be realized by next week — further loosening U.S. gas prices.”

For Thursday’s Energy Information Administration (EIA) storage report, covering the week ending March 24, the median of seven estimates submitted to Bloomberg as of early Wednesday was for a 55 Bcf withdrawal. NGI estimated a 57 Bcf pull.

A print in line with estimates would modestly shrink the surplus to the five-year average. The five-year average withdrawal for the period is 17 Bcf, while EIA recorded a 15 Bcf injection for the year-earlier period.

Meanwhile, weather models trended colder overnight, breaking a run of warmer trends over the prior three days, according to NatGasWeather.

“A mix of cool shots and warmer breaks will propagate across the U.S.” from late this week through April 11, resulting in “swings between light and moderate national demand every two to three days,” NatGasWeather said. “Overall, highs will generally be in the mid-30s to 60s across the northern U.S. besides locally colder 20s for modest heating demand.” Southern portions of the country will see “highs of 60s to 80s besides locally hotter 90s for very light demand.”

To further reduce the current storage surplus, “the onus is on colder weather patterns coming through in mid and late April, and that could be a tough task,” the firm added. It would likely take one to two months of sustained bullish weather-driven demand and a “much tighter balance” to completely erase the inventory cushion, “neither of which are expected.”

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