A tighter storage picture -- driven by a chilly start to the month -- helped natural gas futures inch higher Tuesday. In the spot market, the prospect of warmer temperatures by the weekend saw prices throughout the Lower 48 reverse from recent gains; the NGI Spot Gas National Avg. slid $1.065 to $3.545/MMBtu.

After trading in a tight 5-cent range from $2.841 up to $2.892, the April Nymex contract settled at $2.884 Tuesday, up 2.7 cents. May followed suit, settling at an identical $2.884 after also picking up 2.7 cents during the session.

Despite weaker cash prices Tuesday, futures “remained well-supported, as the market shifted focus to the low stock situation,” according to Bespoke Weather Services. The current cold snap continued to drive tighter balances Tuesday, “and the lack of a warmer than normal pattern in the medium-range supports” an end-of-season storage scenario under 1.1 Tcf.

“...Balances should ease off at least somewhat over the next few days as the nation, especially the South, moderates quickly in the wake of the current strong cold,” Bespoke said. “Given how tight the spreads are, we think this would increase risk of a pullback in April prices, although we see it as unlikely that any pullback goes lower than the $2.80 level” barring a bearish surprise from Thursday’s Energy Information Administration (EIA) storage report, “a more definitive move warmer in the weather pattern as we look into the back half of March, or both.”

Following last week’s EIA report, Energy Aspects said based on the cold blast sweeping through to start the month it now projects a 1.0 Tcf end-March carryout, about 70 Bcf less than it had projected a week earlier.

“Yes, it is still above the 2013-14 polar vortex carryout, but the margin is now narrow enough to provide firmer support for summer 2019 delivery prices,” the firm said in a note to clients. “On a total withdrawal basis, March 2019 should outstrip the polar vortex March 2014 withdrawal by some 1.6 Bcf/d, thanks to structural demand growth.”

Based on a recent read of balances, Energy Aspects is projecting an end-October carryout of 3.37 Tcf.

“While that level may not leave stocks exceptionally low, we do view it as a critical balancing point for inventories, with little room for stocks to get much lower without spurring potential deliverability concerns ahead of next winter,” according to the firm. “Nevertheless, the market still seems bearish, with open interest in the options market still biased toward seeking downside protection this injection season.”

Recent cold has lowered inventory projections heading into the injection season and offered some hope for natural gas bulls, according to analysts with Tudor, Pickering, Holt & Co. (TPH).

“Heating degree days for the month of February came in 15% stronger than the five-year average, which, combined with freeze-offs, have materially improved the storage picture for natural gas,” the TPH team said in a recent note to clients. “The coldest February since 2015 has reduced our peak storage forecast by around 200 Bcf, and while we still see 2019 balances crossing the five-year average, we now view this as a Q32019 event.

TPH’s team is expecting an above-average 147 Bcf withdrawal from this week’s EIA report, which would drop inventories to 26% below the five-year average.

“An early look at this week’s demand data suggests we could get a similar draw reported for the week ending March 8; if this plays out, we expect inventories to push toward 30% below the five-year average,” the analysts said. “We still see a market that is 1-2 Bcf/d oversupplied, with peak storage expected to be more than 500 Bcf above last year’s mark, meaning gas isn’t out of the woods yet. But with continued strong weather demand the outlook could be a lot less dire.”

Cash Slides As Warm-up Ahead

After significant widespread spot price gains during the previous two trading sessions, and with much colder than normal temperatures this week set to moderate by the weekend, it seemed physical prices could only move in one direction Tuesday.

Freezing temperatures pushing deep into the southern United States this week helped send Texas spot prices north of $4 at some locations Monday. But with Radiant Solutions calling for temperatures in Houston and Dallas to return to near to above normal levels by Thursday and Friday, spot prices quickly reversed Tuesday.

Katy fell $1.215 to $2.965, while Texas Eastern S. TX dropped $1.075 to $2.910.

Prices also fell along much of the East Coast and in Appalachia, though some points continued to trade at elevated levels with below-normal temperatures likely to linger in the region through the end of the work week.

Radiant Solutions forecast temperatures around 15-20 degrees colder than normal Wednesday for major cities along the Interstate 95 corridor. Conditions along the East Coast were expected to gradually warm from there, returning to near-normal levels by Saturday and Sunday, according to the forecaster.

Genscape Inc. daily supply and demand forecasts estimated demand in the Appalachia region would drop down to just under 16 Bcf for Wednesday after approaching 20 Bcf Tuesday. Southeast and Mid-Atlantic demand was expected to drop to around 16.5 Bcf/d Wednesday and Thursday from just over 21 Bcf/d Monday and Tuesday. The analytics firm forecast New England demand at about 3.6 Bcf/d for Wednesday and Thursday, down from a little over 4 Bcf on Tuesday.

Prices at a number of New England locations gained Tuesday. Iroquois Zone 2 climbed $1.120 to average $9.915.

Tennessee Gas Pipeline (TGP) notified shippers early Tuesday that it had resolved an emergent repair impacting a unit at Station 323A in Pike County, PA. The repair, announced Monday, limited 185 MMcf/d of gas flows on the 300 line entering TGP’s Zone 5, according to Genscape analysts Dominic Eggerman and Josh Garcia.

In the West, Northwest Sumas prices continued to moderate from the record-setting peak recorded late last week. Prices at the location averaged $5.625 Tuesday, down $10.005 day/day.

According to a recent update from Enbridge Inc., TSouth capacity on the Westcoast Energy pipeline system -- affecting imports into Sumas at the Washington/British Columbia (BC) border -- was scheduled to increase from about 1.2 million GJ Tuesday to nearly 1.7 million GJ for Wednesday.

Southbound flows on Westcoast have been restricted in the aftermath of an explosion last fall near Prince George, BC, a major factor behind price spikes at Northwest Sumas not just recently but throughout the heating season.

Amid the pipeline restrictions and elevated prices at Northwest Sumas this winter, “some gas flows in the West reshuffled to help backfill some of the supply loss at Sumas. More gas moved northwest on the Northwest Pipeline (NWPL), both from Canada via the Stanfield, OR, interconnect with Gas Transmission Northwest (GTN) and from the Rockies,” RBN Energy LLC analyst Sheetal Nasta said in a recent blog post on the record-setting spikes at Sumas.

“This happened by diverting some gas that normally flows east out of the Rockies on the Rockies Express Pipeline to NWPL. At the same time, gas that flows south to California on GTN also shifted toward Sumas, which in turn pulled more Rockies gas to California via the Ruby Pipeline. But given the limited transportation routes into the Pacific Northwest, there’s only so much gas that can move northbound on NWPL, especially during the winter months, when other parts of the West are also experiencing peak heating demand and competing for supply.”

Consequently, elevated Northwest Sumas basis has pulled up other regional basis prices this winter, Nasta said.

“Between the Westcoast constraints, the Arctic blast and storage deliverability issues converging this week, soaring prices in the Pacific Northwest were all but guaranteed,” she said. “Moreover, this may not be the last of the Sumas premiums we see this winter. Some forecasts are calling for colder-than-normal weather to persist through much of March; Jackson Prairie’s compressor repair is still ongoing; and Westcoast’s March schedule indicates more capacity reductions ahead.

“These ongoing issues, along with other evolving market dynamics across the West, likely will continue to stir up volatility in the region.”

Elsewhere in the West, California prices fell as forecasts called for heavy precipitation to impact the region.

“The western U.S. will stay entrenched in an active weather pattern as multiple upper-level impulses pass through,” the National Weather Service said Tuesday. “An influx of moisture will lead to the potential for heavy rain in parts of California through Tuesday night, and there is a slight risk of excessive rainfall in place where flooding could pose a threat.

“In higher elevations, precipitation will fall as now, and heavy snow of 1-3 feet is likely for the Sierra Nevada -- most will fall through Wednesday but snow remains possible into Thursday.”

Malin shed $1.555 to average $3.400, while PG&E Citygate gave up 99.0 cents to $4.250.

Pacific Gas and Electric Co. (PG&E) was bracing for winter weather conditions to impact Northern California starting Tuesday and continuing through Wednesday afternoon, potentially leading to power outages.

“Our crews are prepared to respond to this new storm that is expected to bring widespread rain to our service area,” said PG&E’s Tom Copriviza, an electric superintendent. “We have a plan to restore power safely and as quickly as possible in areas where outages could occur and have crews, materials and resources strategically placed in those locations.”