Natural gas futures bulls ran out of steam Tuesday after a string of consecutive daily gains as forecasters were calling for supportive April cold to moderate by next week. Spot prices were mixed, with a few Midwest points strengthening on calls for spring snow as much of the Northeast eased off Monday’s weather-related gains; the NGI National Spot Gas Average dropped 9 cents to $2.92.
The May contract settled at $2.738 Tuesday, down 1.4 cents after trading in a 5-cent range from $2.711 to $2.761. June also fell 1.4 cents on the day to settle at $2.770.
NatGasWeather.com said the midday weather data was mixed Tuesday but showed “a rather pleasant temperature regime over most of the country late next week into the first several days of May. We see this transitioning weather sentiment from bullish this week to bearish by the end of next week due to demand looking rather light over most regions to close out April.
“...With deficits quite large and increasing after the next two” Energy Information Administration (EIA) “storage reports are accounted for, we see this putting the pressure on strong production reducing deficits, something that still won’t start happening for another three to four reports out.”
Bespoke Weather Services said afternoon guidance continued to show “a gradual pattern breakdown as we move into the end of April.
“...In the short-term lingering cold could keep cash prices relatively firm, and Thursday’s EIA print will show a decent week/week tightening,” Bespoke said. “However, the natural gas strip shows little evidence of a major rally, making any move back towards $2.77-2.78 a strong opportunity to gain short exposure with an unlikely test of $2.80-2.82 easily holding. Meanwhile, once cash eases we would look for the front of the strip to pull back another 5-10 cents.”
Turning to the spot market, some uncharacteristically cold spring temperatures continued to have an impact on prices across the northern United States Tuesday.
After “strong spring storm” passed through the Midwest and Northeast to start the week, “demand remains strong across the North and East with temperatures running 10-25 degrees below normal,” NatGasWeather said Tuesday. “There will be a brief break...across the Great Lakes and East, although a colder trending system is still on track to arrive Thursday-to-Friday with rain and snow showers.
“This second system won’t push as deep into the South and Southeast, thus requiring less national demand than the current system, but still stronger than normal,” the firm said. “The West will see weather systems continue to track inland with rain and snow, but with mild breaks in between, averaging out to near normal.”
Most points in the Northeast moderated Tuesday after gaining to start the week, though the constrained Algonquin Citygate added another 35 cents to $6.95. Transco Zone 6 New York fell 10 cents to $2.90.
Genscape Inc. was calling for New England regional demand to fall slightly day/day Wednesday, from 2.94 Bcf/d down to 2.39 Bcf/d. Appalachian regional demand -- including New York and New Jersey -- was expected to taper off to around 9.21 Bcf/d Wednesday after reaching 14.42 Bcf/d Tuesday.
In the Midwest, prices were mixed, though some points continued to climb as temperatures were expected to remain cold across much of the region, with snow forecast for some areas. Radiant Solutions was calling for temperatures in Chicago and Minneapolis to stay around 15 degrees colder than normal Wednesday.
Chicago Citygate added 11 cents to $3.73, while Joliet jumped 23 cents to $3.84. In the Midcontinent, Northern Natural Ventura surged 44 cents to finish a hair under $4 at $3.99.
The National Weather Service late Tuesday was calling for “another late season snowstorm” to hit “parts of the Upper Midwest on Wednesday as a surface low pressure system slides eastward across the central Plains and into the middle Mississippi Valley.
“To the north side of this low, temperatures will be well below normal and cold enough to support accumulating snowfall,” NWS said. “Expect snowfall to start” Tuesday night “across western portions of the Dakotas...where accumulations of generally less than six inches are expected.” Snow was expected to “ramp up across portions of the upper Midwest” Wednesday.
NWS is calling for six-to-12 inches of snow from eastern South Dakota to southern Wisconsin.
“The surface low moves into the Ohio Valley and the Northeast on Thursday, and mainly light accumulating snowfall will spread into portions of the Great Lakes and interior New England,” the forecaster said.
In California, SoCal Border Average shed 12 cents to $2.26, while SoCal Citygate retreated sharply after spiking by nearly $1 on Monday. The point finished 99 cents lower to average $3.11.
The import-constrained Southern California Gas Co. (SoCalGas) on Tuesday had revised higher its projected receipts through the end of the week. The utility was forecasting daily receipts of around 2.6 Bcf/d, up from receipts of around 2.46 Bcf/d Monday. System demand is expected to hover around 2.5 Bcf/d through the end of the week, according to the utility.
Further upstream in West Texas, prices weakened for the second straight trading day. El Paso Permian gave up 11 cents to average $1.51 (including a low of $1.10), while Waha tumbled 13 cents to $1.81.
In Canada, NOVA/AECO C fell C4 cents to average C$1.12/GJ after adding C34 cents Monday. Record April demand in the region hasn’t been enough to prevent widening negative AECO basis differentials, according to Genscape.
“Alberta demand is holding strong well into April as the province -- as with many U.S. markets -- deals with one of the coldest Aprils in history. This month’s average population-weighted temperatures are the lowest of any April since at least 2009,” the firm said.
The cold comes as Alberta has seen seven straight winters of structural demand growth, including a temperature-adjusted 0.55 Bcf/d of year/year growth this past winter, according to Genscape.
“Combining the cold with the structural demand growth already present in the market, we see demand reach record highs,” Genscape said. “Demand is averaging an April record high of 5.69 Bcf/d and has not dropped below 5 Bcf/d on any single day. To put that in context, April demand has never topped the 5 Bcf/d mark in the last 11 years.”
While Alberta has also seen an increase in exports, helped by the region’s cheap spot prices, AECO basis continues to widen. Using Daily GPI prices, Genscape calculated an average negative basis of US$1.57 month-to-date, “by far the weakest April on record. The weakness is driven by both provincial production growth and intensified gas-on-gas competition into AECO’s traditional export markets,” the firm said.
“This month, the province is pumping out an average 12.38 Bcf/d, only slightly below March but more than 0.85 Bcf/d greater than last April.”
Genscape said its SpringRock production forecast shows Alberta output continuing to grow “as oilsands demand for condensates from liquids-rich Alberta basins remains high” and Canadian crude “continues to discount its way into U.S. oil markets.”
With production strong, regional storage inventories are in-line with the five-year average “and expected to fill relatively quickly given the forecast for sustained production growth and the looming retreat in weather-driven demand, suggesting further weakness for AECO,” the firm said.