Natural gas futures started Monday on a soft note and continued to deteriorate throughout the day as cold weather blasts on tap for the remainder of March and into April couldn’t compete with near-record production. The Nymex April contract settled 3.7 cents lower at $2.651. Spot gas, meanwhile, was mixed but mostly higher as a cold snap is currently making its way across the country. The NGI National Spot Gas Average fell 9 cents to $2.56.

April futures opened the session at $2.683, just a half-cent shy of Friday’s settle, as weather forecasts during the weekend were little changed. Although the midday weather model runs trended a little colder for late this weekend into next week by holding cold air over the Northeast longer and stronger, they were potentially not quite cold enough for March 26-30, according to NatGasWeather.

Three primary periods of interest play out during the next two weeks, beginning with a strong weather system with rain, snow and colder-than-normal temperatures tracking out of the central United States late Monday and into the eastern part of the country for the rest of the week, the forecaster said. “This will result in stronger-than-normal national demand as lows drop into the 10s to 30s behind the cold front.”

Mild upper high pressure will quickly build in across the southern and eastern United States this weekend into early next week, but it may be a little colder over the Northeast coast as a weather system is slower to exit, NatGasWeather said. “This keeps the ridge over the central U.S. toward the mid-Atlantic Coast a little weaker as well, but still holds it most days March 26-30.”

Cool conditions are expected to return across the northern one-third of the country March 31-April 3, while still rather mild over the southern half of the country with comfortable highs of 60s-80s, it said. Going forward, the markets are likely to be focused on the amount of cold arriving into the northern U.S. during the March 31-April 3 period, likely dictating weather sentiment. “Specifically, will colder-than-normal conditions push south through Chicago to New York City? Neutral to slightly bullish if it does. Bearish if it doesn’t.”

Even if the colder temperatures prevail, traders are finding it increasingly difficult to ignore near-record production. “The entire natural gas strip is selling off on recent production increases, as supply-side loosening is clearly absorbing impressive weather-driven demand through the next couple of weeks,” Bespoke Weather Services analysts said.

Indeed, Lower 48 dry gas production nearly broke a single-day record on Saturday (March 17) when it reached 79.4 Bcf/f, just 100 MMcf/d shy of the record set on Feb. 28, according to PointLogic Energy. “The last seven days have been a banner week for production, with four days above 79.0 Bcf/d,” it said.

Versus the 30-day average, dry gas production is up more than 0.5 Bcf/d, with Texas production notching the biggest rebound, more than 0.2 Bcf/d higher. Midcontinent production is the only region showing a deficit to the 30-day average, PointLogic Energy said.

Although the current technical picture continues to weaken as prices take out support in the $2.65-2.68 range, it will improve if prices can retake that level, Bespoke said. The strip, however, is indicating that record production is easing concerns about recent tightness and limited storage. If the trends continue, there is a bit of unraveling left that spreads can do.”

“After what could be best described as a sporadic up and down season, February’s warmth has ceded to March chills along the East Coast, a primary reason why average domestic demand came out on top at 83.8 Bcf/d,” PointLogic Vice President Jack Weixel said.

The last two winters averaged just 77.5 Bcf/d (2016-17) and 80.3 Bcf/d (2015-16). Compared with the five-year average, winter 2017-18 comes out on top by 2.1 Bcf/d, but is below the polar vortex winter of 2013-14 by 3.0 Bcf/d, he said. At the end of January, winter 2013-14 was only 2.7 Bcf/d above winter 2017-18, “which shows what a difference a moderate February can make.”

In the spot gas market, most markets strengthened modestly as the cold weather system moving out of the central United States late Monday was expected to move eastward, sending temperatures as deep as the Southeast below normal. Henry Hub gas inched up 2 cents to average $2.63, while Houston Ship Channel rose 6 cents to average $2.73.

Domestic demand in the Lower 48 was modeled Monday at 73.9 Bcf/d, about 0.7 Bcf/d higher than Sunday’s total of 73.2 Bcf/d, according to PointLogic. “This week, peak demand is expected to occur Tuesday and should hit above 80.0 Bcf/d, as the Eastern Seaboard faces the possibility of a fourth nor’easter to roll in mid-week,” it said. The forecast indicates a steady decline in domestic demand through the end of the week, however, and domestic demand fall to a more seasonal average of 72.5 Bcf/d by March 29.

Pricing locations across most of the East were up, although New England market hubs shed some serious weight after peaking last week. At the Algonquin Citygate, spot gas averaged $4.54, a drop of $3.08 on the day. Iroquois Zone 2 fell 18 cents to $2.84.

At Tetco M3 delivery, spot deliveries jumped 18 cents to $2.82, while Transco Zone 6 NY picked up 4 cents to average $2.88.

In the Midwest, Chicago Citygate edged up 3 cents to $2.48, while Michigan Consolidated was up 2 cents to $2.49. At Panhandle Eastern in the Midcontinent, spot gas tacked on 4 cents to average $2.10, while Northern Natural Ventura jumped 15 cents to $2.47.

Prices in California moved lower as milder conditions were in store for the start of the week before some cooling in the next few days. At the PG&E Citygate, spot deliveries were down 3 cents to $2.68, but SoCal Citygate plunged 53 cents to average $2.91.

Gas prices in California could have additional room to fall if recent hydro outlooks are any indication. The outlook for California hydro is in the midst of a radical turnaround, according to data and analytics company Genscape Inc.

At one point only three weeks ago, Sierra statewide snowpack was a tick away from an all-time record low of 19% of normal. Then came what is being referred to as “Miracle March.” This month, the California Sierra Mountains have received 149 inches of snow, bringing snowpack (as of March 15) to 40% of normal and rising.

This month is already the sixth biggest March in the past 50 years, with more storms on the way, Genscape said. Forecasts are calling for another one-to-two feet this week. “From a gas perspective, this rebound further takes the wind out of the bullishness a low hydro season would have generated,” the Louisville, KY-based company said.

In January, Genscape already had notified clients that a low hydro year this year wouldn’t be quite as bullish gas as those in the past since California ISO generation has added so many megawatts of solar generation and negawatts from energy efficiency and demand response.

A look at the SoCal Citygate forward curve shows April gas priced Friday at $2.39, May priced at $2.373 and the balance of summer (May-October) priced at $2.664. Summer 2017 prices, meanwhile, averaged $3.34, according to historical Daily GPI data.