May natural gas was set to open Tuesday about 1.6 cents lower at around $2.736 as forecasters are calling for recent April heating demand to make way for more moderate conditions by the end of the month.
According to NatGasWeather.com, “The overnight weather data held colder trends across the Northeast late this week but was milder trending for the last several days of April into the first few days of May, favoring a rather comfortable pattern setting up with very little heating or cooling demand.
“Overall, we continue to view the weather data as trending from bullish this week, neutral this weekend into the middle of next week, then bearish after.”
Lean storage inventories continue to compete with strong production for influence over the direction of the market, according to the firm.
“With deficits quite large and increasing” with the next two Energy Information Administration (EIA) storage reports, “this puts the pressure on strong production cutting into it during the shoulder season,” NatGasWeather said. “Recent weather patterns have been rather bullish, but with them soon becoming bearish, production will finally have an opportunity to reduce deficits. But will the pace be fast enough to satisfy markets?”
Bespoke Weather Services viewed the overnight data as “generally mixed, with European guidance slightly increasing cold risks through the medium-range even as American guidance has trended more significantly warmer...Even if a bit more cold lingers, any intense cold should fall off after April 23.
“...May natural gas prices declined overnight as the entire strip has gotten hit hard after weak buying” Monday, Bespoke said. “Cash prices were incredibly strong with a $2.82 midpoint” Monday, “which was seen supporting prices. Those should pull back over the rest of the week as cold eases, though with the bulk of the cold sticking around through April 22 they may remain bid and allow for a couple more short-term pops to $2.75-2.78.”
According to EIA's latest Drilling Productivity Report, production from the nation's seven most prolific onshore unconventional plays -- the Anadarko, Appalachian and Permian basins, and the Bakken, Eagle Ford, Haynesville and Niobrara formations -- is expected to increase month/month in May, continuing a longstanding growth trend.
Total natural gas production from the plays is expected to reach 66.91 Bcf/d in May, a 1.6% increase compared to 65.83 Bcf/d in April. The Appalachian Basin will lead the way again, with an estimated 27.71 Bcf/d, compared to 27.32 Bcf/d in April, EIA said.
Increases are also expected in the Anadarko (6.54 Bcf/d from 6.50 Bcf/d), Bakken (2.23 Bcf/d from 2.19 Bcf/d), Eagle Ford (6.67 Bcf/d from 6.56 Bcf/d), Haynesville (8.54 Bcf/d from 8.33 Bcf/d), Niobrara (4.94 Bcf/d from 4.88 Bcf/d) and Permian (10.27 Bcf/d from 10.05 Bcf/d).
May crude oil was set to open about a dime lower at around $66.12/bbl, while May RBOB gasoline was down fractionally at around $2.0361/gal.