Natural Gas Futures Prices Bounce Higher on Cooler Late April Forecast, Short-Covering - Natural Gas Intelligence

Natural Gas Futures Prices Bounce Higher on Cooler Late April Forecast, Short-Covering - Natural Gas Intelligence

This article is part of NGI's Daily Gas Price Index. Click here to request a free trial keyboard_arrow_right

Markets| LNG| Natural Gas Prices| NGI All News Access| Permian Basin

Natural Gas Futures Prices Bounce Higher on Cooler Late April Forecast, Short-Covering

Still on a sugar high from too many Cadbury eggs over the Easter holiday weekend, natural gas futures prices soared as weather data showed cool weather returning to the Lower 48 in about a week’s time. With some short-covering likely aiding the rally, the May Nymex natural gas contract settled Monday’s regular session at $2.172/MMBtu, up 16.1 cents from Friday.

At A Glance:

- Weather system to drive up demand
- LNG demand holding strong
- Pipeline work pressures Permian cash

Spot natural gas prices were mixed as large gains on the West Coast negated moderate declines elsewhere – including negative prices in West Texas. NGI’s Spot Gas National Avg. ultimately climbed 19.0 cents to $2.475.

With traders back at their desk on Monday, the latest weather models dominated activity early in Monday’s session. NatGasWeather said there’s been some choppiness with each run, though there is general agreement that weather could take a chillier turn by this weekend.

[ Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

The forecaster said the midday weather data held a cool weather system tracking across the northern United States April 17-19 that would likely drive natural gas demand back to moderate levels. However, demand is seen fading by April 21 as mostly comfortable temperatures spread over most of the Lower 48. What’s more, longer-range weather maps favor light demand holding over most of the country the last week of April in a “neutral to bearish” setup, according to NatGasWeather.

The forecaster noted that LNG demand also remained strong at the start of the week, with nominations holding not far off the 14 Dth/d mark. “It’s also possible gains were aided by a short-covering rally as price began to move higher away from $2,” NatGasWeather said.

Going forward, with the potential for liquefied natural gas exports to increase to 15 Bcf/day in the next couple of months, and U.S. production to drop under 98-99 Bcf/d, the balance has the potential to tighten ahead of summer heat, according to the firm. “We expect a tighter balance, and a hotter-than-normal summer will be needed or U.S. natural gas supplies will be massively oversupplied ahead of next winter.”

Indeed, an exceptionally mild winter ensured that gas in underground storage ended the withdrawal season at unseasonably – and unsustainably – high levels. The Energy Information Administration (EIA) said stocks for the week ending March 31 stood at 1,830 Bcf, which is 443 Bcf higher than year-earlier levels and 298 Bcf above the five-year average.

Looking at what is likely to be the first build of the traditional injection season, analyst estimates are wide ranging. Preliminary projections ranged from a withdrawal of 20 Bcf to an injection of 40 Bcf. NGI modeled a 35 Bcf build.

This would compare with last year’s 8 Bcf injection and the five-year average build of 28 Bcf.

Tudor, Pickering, Holt & Co. (TPH) analysts pointed out that with Henry Hub prices having largely retraced prior lows, the level of coal-to-gas switching has remained topical for hints on potential downside protection via demand, excluding LNG. Data over the weekend pushed natural gas’ share of the thermal stack back towards the 73% range versus an average of 70% through March, according to TPH. This is supportive of around 2.5 Bcf/d of incremental demand versus levels earlier in the first quarter of 2023 in which natural gas held around 67% of the thermal stack.

The TPH team noted that LNG feed gas remains supportive after the restart of Freeport and demand has risen incrementally via coal-to-gas switching. However, “the market has remained loose on a weather-adjusted basis with more supply on the come, in our view, despite the significant decline in the 2023 curve.”

Waha Goes Negative

With sluggish demand outside of the West Coast, pipeline maintenance that curbed transport capacity out of the Permian Basin took a toll on prices in the region.

Waha next-day natural gas prices plunged 97.5 cents from Friday to average 43.0 cents for Tuesday’s gas day. Though the sub-$1.00 pricing is significant on its own, the low end of the range of prices proved even more noteworthy. Waha cash tumbled as low as negative $1.500.

Similar price behavior was seen at El Paso Permian, where spot gas dropped to negative $1.500 before averaging 45.5 cents for Tuesday delivery.

Other locations in West Texas remained in positive territory on Monday but were deeply discounted to most other U.S. hubs.

This isn’t the first time Permian prices have gone negative. With robust production filling pipelines out of the basin, regional hubs first dipped below zero in the spring of 2019. Prices have frequently fallen into negative territory during the shoulder seasons, with the current one no exception.

This time around, planned pipeline maintenance on El Paso Natural Gas (EPNG) was set to restrict flows, resulting in the discounted pricing in the region. From Tuesday to April 18, EPNG was scheduled to completely shut in westbound flows because of a repair on Line 1300, between Caprock and Roswell, both in New Mexico.

In terms of day/day cuts, up to 519 MMcf/d would be restricted through the Caprock N constraint, according to Wood Mackenzie. “Flows through the Caprock N constraint come out of the Permian and head westbound toward EPNG’s North Mainline,” said Wood Mackenzie analyst Quinn Schulz. “Over the past 30 days, the Caprock N constraint averaged 462 MMcf/d and maxed out at 538 MMcf on March 27.”

On its own, the pipeline work would likely lower regional prices. However, to make matters worse, the event would coincide with upcoming Gulf Coast Express maintenance from Tuesday to Friday. This adds to the downside pressure on Permian prices.

Elsewhere across the country, the stormy weather pattern that blanketed the western United States over the past week or more was set to continue this week. The National Weather Service (NWS) said onshore flow off the Pacific Ocean and a front moving onshore would create rain over parts of the Pacific Northwest. As the boundary passes, higher-elevation snow was possible into Tuesday and could move into parts of the Northern Intermountain Region. By Wednesday, areas near the coast in the Pacific Northwest may see snow levels fall, while others may see more snow and coastal rain.

As for prices, gains of more than $2.00 from Friday were seen at several locations throughout the Rockies, Pacific Northwest, Southwest and California.

Northwest S. of Green River cash shot up $2.890 to average $4.900. Stanfield picked up only 48.5 cents but averaged $5.000 for Tuesday.

El Paso S. Mainline/N. Baja spot gas moved up $2.540 to $5.385, while the SoCal Border Avg. climbed $2.025 to $5.395.For comparison, benchmark Henry Hub slipped 2.0 cents to $2.155.

© 2023 Natural Gas Intelligence. All rights reserved.

ISSN © 1532-1231 | ISSN © 2577-9877 |