Natural Gas Futures Tumble Early Following Milder Weekend Weather Trends - Natural Gas Intelligence

Natural Gas Futures Tumble Early Following Milder Weekend Weather Trends - Natural Gas Intelligence
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Natural Gas Futures Tumble Early Following Milder Weekend Weather Trends

Bearish weekend weather trends put pressure on natural gas futures in early trading Monday as analysts predicted potential volatility heading into the front-month expiration early this week.

The expiring April Nymex contract was down 10.7 cents to $2.109/MMBtu at around 8:40 a.m. ET. May was off 10.4 cents to $2.257.

Weather models trended warmer over the weekend, though the outlook for the next 10 days showed enough cold for a “slight bullish lean,” according to NatGasWeather.

The latest data favored a “comfortable U.S. pattern” during the April 6-10 time frame, NatGasWeather said.

“Generally, temperatures across the northern U.S. will experience highs mostly in the 30s to 50s, with lows of teens to 30s for moderate demand,” the firm said. “There will be weather systems dipping into the southern U.S. at times as well, although still quite comfortable with highs of 60s to 80s for light demand.

“Essentially, most of the temperature-driven demand going forward will be over the northern U.S.”

It will likely take sustained colder than normal temperatures over northern portions of the country during the month of April to help shrink the storage surplus to the five-year average to below 200 Bcf, according to NatGasWeather.

“While longer-range weather maps suggest a cool northern U.S. scenario is possible, we continue to view the primary risk as being the weather maps trend warmer in time,” the firm said.

The bearish adjustments to the weather outlook over the weekend had the April contract testing key support near $2.11 early Monday, EBW Analytics Group analyst Eli Rubin observed.

Aside from weather, EBW estimates also pointed to declining LNG feed gas volumes, with the recent seven-day average dropping to 12.6 Bcf/d. Production, meanwhile, reached a two-week high over the weekend, according to the firm.

“Daily spot demand could sink into the weekend as weather-driven gas demand is likely to slump 10 Bcf/d from Wednesday to Friday,” Rubin said. “The primary near-term price catalyst, however, will be the April contract options expiry tomorrow and final settlement Wednesday — likely increasing volatility.”

Despite a “fundamentally supportive” seasonal outlook, the May contract could decline as it takes over as the front month, according to Rubin.

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