Natural gas forwards markets couldn’t catch a break following the Memorial Day holiday as forecasts for another week-plus of mild weather and a double whammy of a storage injection proved to be the straw that broke the camel’s back.

July forward prices plunged an average 32.6 cents from May 26 to June 1, with Northeast pricing hubs shedding as much as 44 cents, according to NGI’s Forward Look.

The dramatic slide started last Tuesday as the Nymex July futures contract tumbled 16.5 cents as weather, or the lack thereof, dominated market interest. In fact, the U.S. Energy Information Administration (EIA), in its Short-Term Energy Outlook released May 9, projected June to have 240 cooling degree days (CDD), 10 less than the 10-year average. EIA’s projection is based on weather forecasts from the National Oceanic and Atmospheric Administration.

“Historically, each CDD is worth around 1.5 Bcf of demand, so if we have 10 less CDDs than normal, weather-related demand would be around 15 Bcf below normal,” said Genscape Inc.’s Eric Fell, senior natural gas analyst. Genscape, based in Louisville, KY, is a data and analytics company that provides intelligence to energy and commodity markets.

Indeed, a weak cool front was expected to sweep across the upper Great Lakes and Northeast through the weekend with slightly cooler-than-normal temperatures, according to forecaster NatGasWeather. The rest of the country was forecast to have mostly comfortable temperatures, with highs mainly in the upper 70s to lower 90s. The forecaster noted, however, that 90-degree temperatures would be quite limited as heavy showers were forecast over the southern United States.

Yet another weather system and associated cool shot was expected to impact most regions east of the Rockiesduring the first full week of June with areas of showers and below-normal temperatures. This system is what led to the markets being disappointed to open the week, NatGasWeather said.

“It’s when this system exits late [this] week where the weather data has trended warmer/hotter over the east-central U.S.,” the weather forecaster said. “The weather models still differ on the exact amount of warming to expect, but to our view, widespread 80s to mid-90s are likely over all but portions of the western and far northern U.S., thereby increasing natgas-based demand for cooling.”

But even the prospect of hotter weather later this month was not enough to temper the markets. Nymex futures fell another 7 cents last Wednesday as cash price weakness and some stop-loss selling sent the July contract barreling past the 100- and 200-day moving averages, according to analysts at Mobius Risk Group.

The July contract closed at $3.145 last Tuesday “and the 100- and 200-day moving averages stood at $3.12 and $3.09, respectively,” Mobius said after Wednesday’s market close. “A sharp decline at 7:36 a.m. driven by the sell of 6,000 contracts caused the first breach of the aforementioned technical barriers.”

The July contract briefly rebounded with a spike back up to $3.14, but shortly thereafter, the downward trend resumed, the Houston-based company said. Meanwhile, cash prices fell below $3 for the first time since late April, which also contributed to the futures weakness.

The final facet of Wednesday’s decline, Mobius said, was a likely acceleration of position squaring ahead of further short-term price declines. On Friday, the Commodity Futures Trading Commission reported that Managed Money net length in Nymex natural gas contracts was still above 200,000 contracts. While slightly lower than the prior week, the level remained well above previous year peaks dating back to 2006, it said.

Alas, Thursday’s storage report from the EIA failed to resuscitate the markets as the agency reported an implied 85 Bcf build into storage inventories for the week ending May 26. While 4 Bcf of that injection was a reclassification from working gas to base gas, the injection still came in slightly above market expectations.

“This marks the third week in a row that storage has come in above consensus estimates, missing by an average of 5 Bcf per week,” Wells Fargo Securities LLC analysts said in a note Thursday afternoon.

Last week’s reported injection was also noteworthy because it was higher than the same week a year ago, according to Mobius. “This is particularly relevant for market bulls, who at one point earlier this year projected an end-of-October inventory level of 3.5 to 3.6 Tcf. Since the start of injection season (April), cumulative weekly builds have been 57 Bcf higher than the same eight-week interval last year,” it said.

As of May 26, working gas in storage stood at 2,525 Bcf, which is 370 Bcf less than last year at this time and 225 Bcf above the five-year average of 2,300 Bcf.

Thursday’s 6.3-cent drop brought the Nymex July contract down to $3.008, a level the market appears to be comfortable with for the time being. On Friday, the prompt month traded mostly sideways and ultimately settled less than a penny lower at $2.999.

“We thought it was going to be of interest to see if the coming warmer pattern would be enough to stop the sharp selloff that's dropped prices an impressive 40 cents in just over a week,” NatGasWeather said. “We either see the markets bluffing they aren't concerned about the coming warmer trending pattern, or the damage done from yesterday's storage report is still weighing heavily on sentiment, which has pushed next week's expected build to the mid-90s Bcf on ICE [Intercontinental Exchange] swap.”

After three consecutive days of heavy selling, analysts at weather forecaster Bespoke Weather Services said prices are approaching oversold levels without all that much of a clear catalyst to push them much lower. While Bespoke contended that the technical picture was not especially bullish and that estimates for the EIA data due next week continue to rise into the 90 Bcf-plus range because of the holiday, thereafter, there could be some tightening that could help the market bottom, it said.

“Weather also may help, with forecasts between days eight-to-10 beginning to show a more bullish pattern arriving,” New York-based Bespoke said.

Global weather guidance has been consistent, with significant heat arriving in the medium- and long-term that would pull heating demand far above average, while the Canadian weather ensembles turned a bit more bullish overnight and the European ensembles have gradually been trending toward the Global suite, the forecaster said.

Even without the help from Mother Nature, Wells Fargo analysts remain bullish on gas as the bank’s storage model continues to indicate that the market is more than 2 Bcf/d undersupplied, and will likely remain so throughout the summer.

“Despite our recent reduction in our 2018 gas price forecast (to $3.30, from $3.50), we remain bullish on natural gas on a tighter supply/demand balance (excluding weather), with a $3.50/MMBtu long-term price forecast,” Wells Fargo said.

Part of the structural tightness in the market is due to rising exports, both to Mexico and in the form of liquefied natural gas. Genscape shows pipeline nominations continuing to recover from disruptions to Train 1 before the Memorial Day holiday, coming in around the 2 Bcf/d mark.

But exports to Mexico, which had been hovering around 4 Bcf/d, were expected to decline after NGPL on Thursday announced an outage at compressor station 300 in Victoria County, TX, that temporarily will limit southbound throughput capacity until further notice.

NGPL’s operational delivery capacity to the NET Mexico pipeline at “NET Mexi/NGPL” was reduced to 87 MMcf/d from 412 MMcf/d, according to Genscape. Scheduled capacity location dropped to 83 MMcf/d for June 1 and 73 MMcf/d as of the June 2 timely cycle, cutting about 220 MMcf/d of flow compared to the prior 30-day average.

NGPL deliveries to NET were already poised to drop, however, as the NET Mexico pipeline was scheduled to begin maintenance Friday, reducing that pipeline’s export capacity and thus the likelihood of decreased deliveries from NGPL at the Net Mexi/NGPL location, Genscape said.

“When NET underwent maintenance in April, flows from NGPL and TGP were cut to zero, with the rest of what did flow on NET coming from Texas intrastates,” Genscape said.

Diving further into the forwards markets, most pricing hubs followed the lead of Nymex futures. The Nymex July futures contract shed 30 cents from May 26 to June 1 to reach $3.008, August plunged 30 cents to $3.047, the balance of summer (August-October) slid 29 cents to $3.05 and the winter 2017-2018 tumbled 24 cents to $3.27. That’s where the dramatic losses ended as the rest of the futures strip was down 5 cents or less.

Northeast points posted far steeper declines across the forward curve. The biggest loser was the Algonquin Gas Transmission Citygates, which saw July forwards slide 44.2 cents between May 26 and June 1 to reach $2.998, August forwards shed 43 cents to $2.996, the balance of summer (August-October) dip 41 cents to $2.81 and the winter 2017-2018 drop 29 cents to $6.75, according to Forward Look.

The steep losses at Algonquin come even as New England is poised to lose gas from two current suppliers beginning as early as next year, according to Genscape. ExxonMobil Corp. announced plans to decommission the Sable Offshore Energy Project (SOEP) by early 2018. SOEP has been producing since 1999 and was the first offshore project in Nova Scotia.

Meanwhile, Encana Corp. said the Deep Panuke gas facility offshore Nova Scotia is to be shut down, with rig decommissioning between 2019 and 2021. A more exact stop date was not specified.

Storage appears to have played into the profound losses at Dominion as cash prices likely have fallen low enough to incentivize more gas to storage. Cash prices on dropped to $2.23 on Thursday, a 70-cent discount to Henry Hub. Dominion July forwards plunged 37.6 cents from May 26-June 1 to reach $2.21, August forwards slid 37 cents $2.25, the balance of summer fell 34 cents to $2.28 and the winter 2017-2018 dropped 23 cents to $2.80,Forward Look data shows.