The May Nymex natural gas futures contract crumbled in its premiere session in the lead position, anchored to the downside amid a plethora of bearish fundamentals, most notably abundant supply met by a shortage of demand.
At A Glance:
- Prompt month sheds 7.0 cents
- Storage withdrawal expected
- Bearish spring weather ahead
The newly anointed front-month contract shed 7.0 cents day/day to a settlement at $1.718/MMBtu. The contract tumbled from a $1.789 intraday high to a low of $1.704.
Analysts with Gelber & Associates said, “The new front month appears to be reverting to April’s settlement price.”
The April contract rolled off the board Tuesday at $1.575, declining for the fifth straight session to the lowest April expiry since April 1995, according to Bloomberg data.
NGI’s Spot Gas National Avg. stumbled 12.0 cents to $1.235. Traders moved a four-day Thursday through Sunday package ahead of the Good Friday/Easter Sunday holiday weekend.
The market is awash with natural gas. After a 7 Bcf injection into natural gas inventories for the week ended March 15, the total working gas supply stood at 2,332 Bcf, 678 Bcf above the five-year average.
The U.S. Energy Information Administration (EIA) is expected to release its next data slate covering the week of March 22 at 10:30 a.m. ET on Thursday. Cool weather during the review week is expected to have resulted in a return to storage withdrawals.
NGI modeled a 25 Bcf pull. Estimates gathered by Reuters ranged from withdrawals of 23 Bcf to 32 Bcf, with the average at a 28 Bcf pull. A Bloomberg survey resulted in a median 27 Bcf withdrawal.
A drawdown within the range of expectations would compare with the five-year average 27 Bcf pull and the year-earlier withdrawal of 55 Bcf.
The Gelber analysts said projected end-of-season storage estimates are around 2.23 Tcf. That is “an extremely robust amount of gas to begin the injection season with.
“With producers continuing to lay off production and demand tracking seasonal lows, there does not seem to be much for market bulls or bears to cling on to with the exception of storage,” the Gelber analysts said.
Demand Mostly Pressures
The market was counting on a few periods of cool weather blasts to tug inventories lower before the heart of the shoulder season.
Price Futures Group senior analyst Phil Flynn told NGI, “A little bit of unseasonal cool weather could offset the fact that we may see some reduced demand because of the Easter holiday.”
However, the latest weather outlooks regarding supportive demand were disappointing. NatGasWeather said that “a wimpier cold shot” would track across the country from April 2-4, followed by a stronger warm-up over much of the U.S. April 5-10.
The midday American weather model trended warmer than the early morning forecast, with the April 2-4 cold shot covering less ground “to the point where it’s now only barely cold enough,” NatGasWeather said. The midday European model also trended warmer for April 5-10, while on track to lose another 15 or more heating degree days for April 1-10.
Meanwhile, some producers have cut output to curb the oversupply. Wood Mackenzie Lower 48 production scrapes showed output dropped to 99.3 Bcf/d Wednesday versus a recent seven-day average of 100.4 Bcf/d.
But countering the production cuts, and combining with weak residential/commercial (res/com) demand driven by spring weather, feed gas demand to LNG export facilities dropped to 12.1 Bcf/d for Wednesday, down from around 13.0 Bcf/d a few days earlier, data from Wood Mackenzie showed.
EBW Analytics Group analyst Eli Rubin noted an apparent decline in feed gas volumes at the Corpus Christi and Calcasieu Pass liquefied natural gas terminals early Wednesday. NGI’s U.S. LNG Export Tracker showed operating capacity at 58% at Corpus Christi and 56% at Calcasieu Pass.
Flynn told NGI that LNG would not be impacted by the collapse of Baltimore Harbor’s Francis Scott Key Bridge into the Patapsco River on Tuesday “because the Cove Point export facility is further south, so it won’t be impacted by the bridge.”
However, he said that the slowing of coal exports could increase the demand for natural gas. “Supplies are going to be harder to find, and that should generally be supportive.”
Baltimore was the second-biggest port for U.S. coal exports, behind Norfolk, VA, in the first nine months of 2023, according to the latest data from the EIA. About one-fifth of U.S. coal exports left through Baltimore in 2022, EIA said.
Revised Cash Sinks
Prices were lower Wednesday for natural gas traded for Thursday through Sunday, pressured by demand eroded by the holidays.
While a few hubs managed modest gains, the overriding trajectory was down, with the Midwest among the largest losers.
A storm battered the country’s midsection early in the week. But, the latest National Weather Service (NWS) forecasts showed a warming trend in the Midwest that would tug temperatures from highs in the low 40s Wednesday to the 60s on Sunday.
Because of the expected weak holiday and weather-driven demand, the Chicago Citygate average fell 14.0 cents to $1.295, and Dawn sank 11.5 cents to $1.455, contributing to a Midwest Regional Avg. decline of 14.0 cents to $1.320.
The supply glut situation in Texas, along with lackluster demand, pulled the S. TX Regional Avg. 24.0 cents lower to $1.070, the E. TX Regional Avg. fell 12.5 cents to $1.200, and the W. TX/SE NM Regional Avg. fell 6.0 cents but managed to stay positive at 8.5 cents.
