Strength at Eastern points in physical natural gas trading on Monday for Tuesday deliveries was unable to offset broader weakness at most market points. The mild weather forecasts just keep coming, and in overnight futures trading prices responded to updated weather forecasts and added a somber tone to both cash and futures prices.

The NGI National Spot Gas Average fell 4 cents to $1.47 but eastern points on average managed gains of more than a dime. Futures opened trading Sunday night sharply lower and prices never really had a chance once the day-session began. At the close, April had dropped 8.0 cents to $1.711 and May was down by 6.5 cents to $1.808.

Eastern prices scooted higher as temperature forecasts Tuesday across major metropolitan areas expected a steep decline. Forecaster predicted Monday's high of 60 degrees in Boston would drop to 43 by Tuesday before rising to 51 Wednesday. New York City's Monday peak of 58 was expected to drop 10 degrees Tuesday then reach 50 on Wednesday. Chicago's high Monday of 54 was anticipated to plunge to 33 Tuesday and climb only 34 Wednesday, 3 degrees below normal.

Gas for delivery at the Algonquin Citygate rose 37 cents to $1.96, and packages on Iroquois, Waddington gained 2 cents to $1.78. Gas on Tenn Zone 6 200L rose 18 cents to $1.93.

Marcellus points were mostly steady, but couldn't breach the $1 threshold. Deliveries on Dominion South changed hands 2 cents lower at 95 cents, and gas on Tennessee Zn 4 Marcellus added 2 cents to 95 cents, and gas on Transco-Leidy Line was quoted at 94 cents, down a penny.

Major market hubs eased. Gas at the Chicago Citygate shed 3 cents to $1.68, and deliveries to Henry Hub were seen 4 cents lower at $1.62. Gas on El Paso Permian was quoted 3 cents lower at $1.42, and gas at the PG&E Citygate fell 6 cents to $1.80.

If marketers are correct, lower prices may be in the cards for a while.

"We think there may be opportunities for still lower prices," said a Michigan marketer. "None of our customers are in danger of losing supply.”

The market may get a reprieve from ever-falling prices if near-term weather forecasts are correct. Industry consultant Genscape Inc. said in a report that its "weather forecasts are showing national population weighted HDDs [heating degree days] increasing back to seasonal norms by Wednesday and Thursday, then once again retreating to this winter's standard of substantially warmer-than-normal conditions.

"Seasonal temperatures will persist through the week in the Midwest and Midcon regions. Midwest demand is expected to inch toward a peak of 11.76 Bcf/d by Wednesday. The Northeast, New England, and Southeast/Mid-Atlantic will trend cooler, causing demand to peak Thursday in Appalachia at 17.9 Bcf/d, in New England at 3.5 Bcf/d, and in SEMA 17.5 Bcf/d.”

In the West, temperatures “will remain substantially warmer than normal, including strong cooling-degree day readings in the Desert Southwest. California/Nevada demand will remain below 7.3 Bcf/d through the week."

Critical to any price recovery is a decline in production and the number of drilled but uncompleted (DUC) wells, particularly in the Northeast. Wood Mackenzie Ltd. reportedly said the number of DUCs has fallen sharply from initial estimates of 1,200 at its peak to just above 650 wells.

"Producers have obviously been choosing, not surprisingly, to complete wells as opposed to drill new ones," said Societe Generale analyst Breanne Dougherty. "This has added volumes into the supply stack even as rig counts have continued to drop; news out of producers is pretty consistent that capex will remain very light until there is a material improvement in the price environment.

“A combination of all of these supply factors continues to support our view that, at best, production should hold flat this year. The longer gas and oil prices stay low, the larger the risk of production sliding into structural decline by the end of the year,” she said.

Societe Generale’s team is expecting prices to move above $2/MMBtu “as summer weather begins to make its appearance (normally around mid to late May) and for the price to ascend gradually through core summer, reflecting the tightening of the ledger that should start being visible. Our July through December price average is $2.95/MMBtu."

A decline in production is expected by, among others, No. 2 gas producer Chesapeake Energy Corp. and Southwestern Energy Co., the No. 4 gas producer, based on quarterly reports.

"With now two of the top five U.S. gas producers in clear distress, the implications are highly bullish for macro gas," wrote Jefferies LLC analyst Jonathan D. Wolff. "Our bottoms-up 21-basin U.S. supply model is at 3.2% exit-2016 decline rate, but the potential for further declines is becoming more obvious."

Longer term forecasts sent futures bulls running for cover as weather models turned sharply warmer. Monday’s “six-10 day period forecast features widespread above-average warmth, except in New England and the southwestern U.S.," said WSI Corp. in its Monday morning report. The forecast “is sharply warmer than Friday's forecast over the eastern two-thirds of the nation but cooler over the West.” Continental U.S. natural gas-weighted HDDs “are down 20.5 to 78.9 for the period. Forecast confidence is a little higher than average for a change as medium-range models are in good agreement with a pattern shift.

"The Northeast and southwestern U.S. have a risk to the cooler side. The central U.S. and even the East could run warmer by the end of the period."