April natural gas is set to open a penny lower Tuesday morning at $3.04 as heating load is forecast to be below normal levels and traders sense a weakening technical picture. Overnight oil markets rose.
Weather models moderated overnight. "[Tuesday's] six- to 10-day period forecast has trended warmer East/Midwest when compared to yesterday," said WSI Corp in its Tuesday morning report to clients. "CONUS GWHDDs are down 6.5 to 50.4 for the period.
"Warmer risks are placed across the Southwest in through the interior West late in the period as sub-tropical ridge development is forecast to take place. Slight cooler risks are placed across PJM as heights fall from a progressive upper-level disturbance."
Strong March demand and increasing LNG exports have analysts continuing their bullish outlook.
Zach Parham, an analyst with Jefferies LLC, said, "We remain bullish on natural gas on a tighter supply-demand balance (excluding weather), with a $3.50/MMBtu long-term price forecast."
He pointed to the fact that March has felt more like February and that "Over the last five years, residential/commercial demand in March has averaged about 32.7 Bcf/d, and average March residential/commercial demand has been about 13.8 Bcf/d less than February demand. This year residential/commercial demand is virtually flat in March (35.7 Bcf/d) versus February (35.5 Bcf/d), with a colder than average March increasing res/comm demand by about 7.3 Bcf/d year over year. Total U.S. gas demand for March (about 87.9 Bcf/d) is now ahead of February demand (about 86.1 Bcf/d) for the first time on record.”
Demand for LNG keeps increasing as well
"Last week, LNG feedgas deliveries set a new daily high at 2.4 Bcf (reached on two consecutive days). After a slow start to March, deliveries have averaged 1.78 Bcf/d, down from 1.97 Bcf/d in February. However, after averaging only 1.27 Bcf/d for the first 11 days of March, demand has now increased to an average of 2.25 Bcf/d over the last 12 days, reaching over 2.3 Bcf/d for 7 of the last 12 days," he said.
National Weather Service (NWS) figures show both near-term and long-term below average heating loads. For the week ending April, 1 NWS reported that New England is likely to have 157 heating degree days (HDD), or 20 fewer than normal. The Mid-Atlantic is expected to see 126 HDDs, or 31 fewer than its norm, and the greater Midwest from Ohio to Wisconsin is anticipated to have 123 HDDs, or 39 fewer than its normal seasonal tally.
Longer term, NWS said that for the heating season that began July 1, 2016 New England has seen 4,870 HDDs, or 12% fewer than normal, and the Mid-Atlantic and Midwest have tallied 4,279 and 4,595 HDDs, or 15% and 17% fewer than normal, respectively.
In overnight Globex trading May crude oil rose 50 cents to $48.23/bbl and May RBOB gasoline gained a penny to $1.6436/gal.