Natural gas prompt-month futures surged ahead of expiration Tuesday as the weather outlook remained supportive with colder temperatures across the northern United States through the first week of April. In the spot market, moderating temperatures helped send East Coast prices falling for a second straight day; the NGI National Spot Gas Average finished down a penny at $2.35/MMBtu.
In its last day of trading, the April contract climbed 7.3 cents to expire at $2.691 after trading as low as $2.623 and as high as $2.707. April gained a combined 10 cents over its last two days on the board to finish on a high note. The May contract, meanwhile, added 5.7 cents to settle at $2.714. June settled at $2.766, up a nickel on the day.
NatGasWeather.com said Tuesday’s rally was “likely aided by cooler than normal temperatures holding in the weather data across the northern U.S. for the first week of April.
“...We continue to anticipate a brief break between cold shots around April 3, but still with reinforcing strong cold blasts to follow April 4-8,” the firm said. “The markets have to view patterns as at least somewhat bullish then through around April 8-9, but then there will be opportunity for the northern and eastern U.S. to warm up to more spring-like temperatures April 10-13 if high pressure is able to build in, which the latest Global Forecast System model now favors, but still with more to prove.”
NatGasWeather said it views $2.72 as a key level for bears to hold on the front month “or bulls could gain momentum back.”
Powerhouse Vice President David Thompson also attributed Tuesday’s gains to the supportive early April forecast. He noted that April saw the biggest gain as it went off the board. “Whoever had to buy it at close got squeezed a little bit,” he told NGI.
Natural gas has traded in range of around $2.55-2.80 since early February, Thompson said. “We seem to be sharply moving up here” the last two sessions, “more sharply than we’ve had” going back to February. Although “until you break above $2.80, you haven’t really confirmed a new bullish takeover of the market.”
Moving into the shoulder season, Thompson said he expects “choppiness and range-bound trading” for the next several weeks until “people start to have a firm grasp on the summer forecast.”
Bespoke Weather Services said increased nuclear outages also supported prices Tuesday.
“Prices rallied into the expiry as we continue to see adjusted burns relatively tight, even with production near record levels,” Bespoke said. “With incoming cold this is enough to potentially offer a bit more near-term upside, and...we would look for the May contract to potentially test the $2.75 level on any gas-weighted degree day additions or further tight burn readings.
“However, we also feel that the easy part of the move higher has now been made, as production concerns will continually weigh on this market even with relatively tight burns, and we are seeing indications that the cold weather pattern may gradually ease into the middle of April.”
In the spot market, day-ahead prices at Henry Hub climbed 2 cents to average $2.60, nearly a dime lower than the April futures settlement.
Prices in the Northeast fell again Tuesday as conditions were expected to continue moderating throughout the week along the East Coast.
“A mild ridge continues to build over the southern and eastern U.S. through Thursday, bringing with it mostly comfortable conditions where highs will reach the 50s and 60s across the Great Lakes and Northeast, with 70s and 80s over the South and Southeast,” NatGasweather said. “After brief cooling Friday into Saturday, cold air is expected to drop out of Canada and pour across the northern half of the country next week for a return to stronger than normal national demand as lows again reach the teens to 30s over the Midwest and Northeast.”
Radiant Solutions was forecasting highs in Boston to reach the upper 40s Wednesday before climbing into the 50s Thursday and Friday. Highs in Philadelphia were expected to reach the 60s by Thursday.
Genscape Inc. was forecasting New England regional demand to fall from 3.53 Bcf/d Tuesday to 2.77 Bcf/d Wednesday and 2.42 Bcf/d Thursday. The firm’s Appalachia regional forecast showed demand expected to decline from 12.82 Bcf/d Tuesday to 11.33 Bcf/d Wednesday and 10.42 Bcf/d Thursday.
“With shoulder season weather demand forecasted to be lower in April, planned outages in” grid operator PJM Interconnection’s territory “will be ramping up,” Genscape told clients Tuesday. “Planned outages across PJM’s entire stack are forecasted to average 43,588 MW in April and reach as much as 52,265 MW. These figures do not include maintenance and unplanned outages, but plant-side maintenance outages are likely to increase as well.
“PJM demand in April 2017 averaged 2.5 Bf/d, about 0.5 Bcf/d lower than March 2017’s average,” the firm said. “Aggregate demand fell as much as 1.75 Bcf/d between March 2017’s peak demand period and April 2017’s peak outage period.”
In the West, SoCal Citygate fell for the fourth straight trading day, giving up 28 cents to $2.66.
Utility Southern California Gas Co. was forecasting its system demand to decline over the next several days, going from around 2.7 Bcf/d Tuesday down to just under 2.4 Bcf/d by Friday.
Further upstream, prices strengthened throughout West Texas. Waha gained nearly a quarter to average $1.97, while El Paso Permian added 14 cents to $1.71. Both points were trading at or near 30-day lows last week.