April natural gas was set to open Friday about 1.6 cents lower at around $2.601 as overnight forecasts remained supportive through the first week of next month, only not enough to outweigh near-record production and concerns of oversupply.
“The overnight weather data was mixed with the European model a little warmer and the Global Forecast System slightly colder, but both with a decent amount of colder than normal air pouring across the northern half of the country during the first week of April,” NatGasWeather.com said in its Friday morning forecast.
Storage levels remain at a 300 Bcf-plus deficit to the five-year average, and the colder weather to start April “is likely to stall the build season a week longer compared to normal. So, there’s certainly some things that are bullish on the demand side,” NatGasWeather said. “It’s just tough to ignore Lower 48 production running near all-time record highs.”
Bespoke Weather Services noted a slight decrease overnight in projected heating demand for its 15-day outlook, thanks to European guidance moderating on colder temperatures for the second week of April. However, confidence remains high in above normal heating demand across the northern tier through the first few days of next month, according to the firm.
“Natural gas prices have temporarily moved on from” rallying on weather, “as bullish weather forecasts tend to simply add support while any” projected heating demand losses result in lower prices, Bespoke said. “This is as production continues to set new record highs and the market fears it is oversupplied, as seen this morning with the entire strip down another leg.
“We continue to feel that prices are a bit low given expected demand increases and current tightness, but note that the market must move on from the complacency these production levels are giving it before either weather or any demand-side statistics will significantly matter.”
On Thursday the Energy Information Administration (EIA) reported an 86 Bcf withdrawal from underground storage inventories for the week ending March 16, in line with market expectations ranging from the upper 80 to lower 90 Bcf range. For the comparable week last year, 137 Bcf was withdrawn from storage and the five-year average withdrawal for the week stands at just 53 Bcf.
Analysts with Tudor, Pickering, Holt & Co. (TPH) said the on-target withdrawal “indicated a move back toward weather-adjusted market balance, though heating degree day (HDD) data came in strong on nor'easter driven demand, driving the draw above five-year norms.
“Expect the trend to continue as colder than normal weather sustains, with early estimates for the week ending March 23 forecasting larger draws than normal on higher than normal HDD forecasts,” the TPH analysts said. “With supply continuing to chug along at a steady growth pace, we anticipate the market will continue to slide into neutral, cold weather aside.”
May crude oil was set to open Friday about 35 cents higher at around $64.65/bbl, while April RBOB gasoline was trading about 1.4 cents higher at around $2.0239/gal.