Natural Gas Futures Rally Second Day as Market Looks For Bullish ... - Natural Gas Intelligence
Natural Gas Futures Rally Second Day as Market Looks For Bullish Storage Print; Cash Prices Climb - Natural Gas Intelligence
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Natural Gas Futures Rally Second Day as Market Looks For Bullish Storage Print; Cash Prices Climb
Natural gas futures, under heavy pressure most of 2023 amid mild weather and strong production, found a path forward for a second consecutive session on Wednesday as traders focused on export strength and expectations for a bullish inventory report.
At A Glance:
- Prompt month posts 4.9-cent gain
- Analysts see low 20s Bcf withdrawal
- Production slowed by maintenance
The May Nymex gas futures contract settled at $2.155/MMBtu, up 4.9 cents day/day. June gained 3.7 cents to $2.381.
NGI’s Spot Gas National Avg. moved ahead 7.0 cents to $2.620 on Wednesday, bolstered by gains in the nation’s midsection. Late rounds of wintry weather blew through the Rockies and the Midwest.
Production on Wednesday held below 100 Bcf/d – the standard for the past several weeks – amid near-term maintenance events, particularly in the Northeast. Wood Mackenzie estimated output in the region was down about 970 MMcf/d on Wednesday, driven by repair and upgrade work in Pennsylvania that is expected to largely culminate this week.
Still, it contributed to a second day of relatively light output that intersected with forecasts for a steep storage pull relative to the five-year average.
The Energy Information Administration (EIA) storage report covering the week ended March 31 is slated for release Thursday morning.
Bloomberg’s poll as of Wednesday found withdrawal estimates spanning 18 Bcf to 24 Bcf, with a median draw of 20 Bcf. A Reuters survey found estimates ranging from withdrawals of 10 Bcf to 28 Bcf, with a median decrease of 22 Bcf.
NGI modeled a pull of 22 Bcf, matching the average found in a Wall Street Journal poll. The projections compare with a decrease of 24 Bcf a year earlier but a five-year average of flat balances.
Still, even a pull on the high end of expectations would leave stockpiles at robust levels. EIA posted a draw of 47 Bcf for the week ended March 24. That put inventories at 1,853 Bcf, far above the year-earlier level of 1,411 Bcf and the five-year average of 1,532 Bcf.
Analysts at The Schork Report noted Wednesday that, even with some forward progress this week, futures traders know well that momentum has been essentially impossible to maintain this year. With widespread spring weather approaching, they are bracing for a May contract swoon below the $2 handle that would signal further weakness ahead.
“Bulls should be concerned with the lack of follow through,” the Schork analysts said.
Bearish Weather Outlook
For any optimism this week, NatGasWeather on Wednesday cautioned that there were no significant changes in forecasts for this week and the rest of April. The firm noted spots of chilly weather and snow in far northern markets, but it sees mild temperatures in most other regions for “light to moderate demand the next five days.”
Further out, the firm sees milder weather in the North and “exceptionally light and bearish demand April 10-20 after big warmer trends” that could result in “above-normal temperatures ruling most of the U.S.” through the bulk of April.
Against the weather backdrop, analyst Brian LaRose of ICAP Technical Analysis was not betting on an extended bull run either. Rather, he is looking to see if futures prices can level off around current levels. “Still on the lookout for any evidence that would indicate bottoming action,” he said Wednesday.
Meanwhile, LNG export activity has proven steady this year – and is expected to further solidify as U.S. capacity increases and global demand for liquefied natural gas holds strong.
Notably, feed gas volumes at the recovering Freeport LNG facility recently topped 2.0 Bcf/d. The 2.4 Bcf/d plant in Texas is working back to full capacity after a June 2022 explosion forced it out of commission.
Overall LNG feed gas levels hovered around 14 Bcf/d and near record levels early this week, supported by Freeport. But exports stumbled to 13.3 Bcf/d early Wednesday, according to EBW Analytics Group. The firm noted a reduction of demand at Corpus Christi LNG, a side effect of maintenance work.
Spot Prices Strengthen
Cash prices climbed Wednesday as cold shots permeated the Mountain West and the nation’s midsection ahead of the expected warm-up.
In the Rockies, Northwest Wyoming Pool jumped 20.0 cents day/day to average $6.220, and Questar rose 11.0 cents to $6.110.
Defiance in the Midwest gained 7.5 cents to $2.100, while Emerson advanced 8.0 cents to $2.180.
NatGasWeather said that, following moderate demand through this trading week because of strong early-spring storms in the central United States, mild temperatures would settle across swaths of the northern Plains and Midwest by next week. These conditions are projected to arrive as “very nice highs of 60s to 80s” canvas the southern and eastern sections of the country.
Next week, thunderstorms could bring the potential for chilly weather and power outages to parts of the West and Plains. But again, benign temperatures are forecast to cover most of the country, minimizing both heating and cooling demand through the middle of April.
On the pipeline front, Wood Mackenzie analyst Lorraine Bailey noted on Wednesday that Natural Gas Pipeline Company of America (NGPL) issued a force majeure that was expected to last through April 14. NGPL cited pipeline remediation work impacting compressor stations in Oklahoma. This could have knock-on effects on NGPL Midcontinent spot prices, Bailey said. The hub on Wednesday posted a 4.5-cent gain to $1.950.
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