Physical natural gas for Wednesday delivery inched lower in Tuesday trading as energy demand in key eastern market was largely unchanged and power prices softened.
Outside the Northeast, prices at Midwest market points along with Texas, Louisiana and the Midcontinent all moved a few pennies lower. Rockies prices eased about a nickel, and California quotes were off close to a dime.
TheNGI National Spot Gas Average was flat at $2.81. However, Futures prices worked higher before Wednesday's April contract expiration, and at the close April had added 4.4 cents to $3.096, and May had advanced 4.6 cents to $3.177. May crude oil rose 64 cents to $48.37/bbl.
Market technicians paint a short-term rosy picture for futures prices. "It very much looks like it wants to charge toward the $3.25 to $3.30 area," said Brian LaRose, a market technician with United ICAP. "There is a little bit of positioning going on with Wednesday's expiration, but other than that, I don't see any clear signs that the market is ready to roll over just yet.
"Even if it does pull back here, I wouldn't expect anything more than a brief pause before we continue higher based on your typical seasonal cycle. I think the $3.45 area is a reasonable target for this year's seasonal cycle advance. If you look at the last eight years [the Marcellus era], the trend has been a March to April bottom and a much later peak beyond that.
"The market is looking more like your typical history with a seasonal cycle unfolding with May the peak. Another three to four weeks of upside, I think, is doable. Once we see the seasonal cycle top, I think it’s an opportunity to see lower prices. I'm viewing this push higher as a temporary anomaly and more of a seasonal influence than anything."
Strong March demand and increasing LNG exports have fundamental 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.
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."
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 physical trading prices were mostly steady as energy demand was forecast to change little. New York ISO forecast that Tuesday's peak load of 17,984 MW would ease slightly to 17,909 MW Wednesday and slide to 17,804 MW Thursday. PJM Interconnection expected peak Tuesday load of 31,441 MW would slip to 31,160 MW Wednesday before inching up to 32,046 MW Thursday.
Gas on Tetco M-3 Delivery rose 4 cents to $2.73, and gas bound for New York City on Transco Zone 6 gained a dime to $2.79.
Major market trading centers were mostly lower. Gas at the Chicago Citygate rose 2 cents to $2.94, but parcels at the Henry Hub shed 2 cents to $2.93. Gas at Northern Natural Demarc lost a penny to $2.76.
Out west, gas on Kern River fell a nickel to $2.57, and gas on Transwestern San Juan gave up a nickel as well to $2.56. Gas at the SoCal Citygate shed 8 cents to $2.93.