The natural gas futures market shrugged off a bearish government inventory report and flew higher Thursday amid robust demand for U.S. exports, extending a rally to four straight sessions. The April Nymex gas futures contract climbed 16.9 cents day/day and settled at $5.401/MMBtu. May rose 17.2 cents to $5.446.

eia storage chart

NGI’s Spot Gas National Avg. slipped 4.0 cents to $4.700.

Domestic fundamentals provided little ammunition to ignite a rally, with production below 95 Bcf and forecasts on Thursday pointing to modest weather-driven demand.

“Overall, we continue to view the coming pattern as bearish the front two days, slightly bullish Sunday through Tuesday, then neutral/seasonal” between next Wednesday and April 5, NatGasWeather said.

What’s more, U.S. utilities withdrew 51 Bcf natural gas from storage for the week ended March 18, the Energy Information Administration (EIA) reported Thursday. The result fell short of market expectations for a pull in the high 50s Bcf, with analysts noting increased wind power generation during the period.

The print also came in lower than the five-year average pull of 62 Bcf for the week.

Analysts are broadly looking for an injection with the next EIA inventory report. Early estimates submitted to Reuters for the week ending March 25 landed at a mean increase of 9 Bcf.

Markets, however, have looked past domestic fundamentals this week, focusing instead on record calls for U.S. liquefied natural gas (LNG). American exports of the super-chilled fuel have consistently topped 13 Bcf – approaching records and capacity — amid Russia’s month-long war in Ukraine. U.S. LNG feed gas volumes exceeded 14 Bcf on Thursday.

European countries have vowed to wean themselves from Russian energy in protest of the conflict. They would need steady shipments of LNG to help fill the void if they are to replenish storage supplies ahead of next winter.

U.S. Secretary of Energy Jennifer Granholm told reporters Thursday the Biden administration has plans for a joint U.S.-European effort to ensure Western supplies of natural gas to the continent through the coming months. President Biden was expected to provide details Friday.

“The year is all about natural gas, supply-wise, price-wise, policy-wise – a triple ripple for natty,” said The Desk’s John Sodergreen, writing Thursday on the company’s online energy platform Enelyst.

U.S. exporters, already operating near capacity, have little room to ramp up more in the near term. Additionally, the White House lacks the power to order private companies in the LNG market to direct shipments away from other corners of the world in favor of Europe. Still, President Biden could work with counterparts in Europe to provide a roadmap to maximize deliveries to the continent and, in doing so, punctuate the war-amplified demand for U.S. gas.

This added potential for further price support and fueled already bullish market sentiment.

“Such measures would increase summer supply at the margin, helping take European storage to comfortable levels ahead of the next winter, unless Russian inflows fall further,” Goldman Sachs Group Inc. analysts said. However, “these short-term redirection measures are unlikely in our view to prevent demand-destruction-type gas prices from reoccurring until global LNG supplies increase significantly from 2025,” when a next generation of export facilities could open.

At the same time, Bespoke Weather Services noted, U.S. production this year has held below 2021 highs and pre-pandemic peaks. Production this week has hovered more than 1 Bcf below the 2022 high reached early in the year.

Even with weather demand fading, the latest decrease to underground storage lowered inventories to 1,389 Bcf, leaving stocks below the year-earlier level of 1,755 Bcf and the five-year average of 1,682 Bcf. 

Bespoke said long-range forecasts – and recent history – point to a hot summer and strong cooling demand in the summer ahead. If that proves true and LNG exports hold at record levels, the firm said U.S. producers would have to boost output to keep pace with demand and provide utilities cushion needed to restock inventories prior to the next winter.

“The longer we go without even getting back to year-to-date highs, the more difficulty we see in comfortably refilling storage by the end of injection season, especially when factoring in our expectation of a hotter summer,” Bespoke said.

Spot Prices Slide

Cash prices dipped lower as weather demand faded.

NatGasWeather said light national demand permeated the Lower 48 Thursday. More of the same was expected Friday and into Saturday, as “most of the U.S. experiences comfortable highs of 50s to 80s. There’s still a strong early spring storm over the Great Lakes and East with rain, snow, and thunderstorms, although with little subfreezing air.”

Against that backdrop, prices dropped in most regions.

Millennium East Pool in Appalachia fell 9.5 cents day/day to average $4.360, while Florida Gas Zone 3 in the Southeast slipped 7.5 cents to $5.060.

In the Rockies, meanwhile, Northwest Sumas lost 10.5 cents to $4.220 and Stanfield fell 5.0 cents to $4.430.

On the West Coast, Malin shed 5.0 cents to $4.510.

That noted, weather patterns are expected to shift Sunday through Tuesday, with chilly air from southern Canada descending into the Midwest and Northeast and delivering lows in the teens to 30s.

Weather-driven demand “is expected to gain 8-10 Bcf/d into early next week to lend support to the spot market,” said EBW Analytics Group’s Eli Rubin, senior analyst.

Looking to the first week of April, however, NatGasWeather expects seasonal temperatures and modest demand, with highs from 40s to 60s in northern markets. Much of the South will enjoy highs from the 60s to 80s, the firm said.