After partially recovering from a brief but pronounced sell-off the night before, and with the market still getting a read on balances heading into the shoulder season, natural gas futures were trading lower early Friday. The April Nymex futures contract was down 4.5 cents to $2.776/MMBtu shortly before 9 a.m. ET.
Market observers appeared somewhat perplexed by a sharp and sudden nearly 10-cent drop in prices Thursday evening, when the April contract went from just above $2.810 to as low as $2.721 in a matter of minutes.
“We have seen some wild price action over the last 12 hours, as April natural gas prices briefly plunged all the way to $2.721,” Bespoke Weather Services said. “...The move appears algo-driven as opposed to organized selling, as prices did bounce back as high as $2.80 overnight.
“The main item we see on the fundamentals side this morning is a large drop” in liquefied natural gas (LNG) exports, “down to 4.0 Bcf after being as high as 5.7 Bcf earlier in the week,” the firm said. “Production was also revised upward” for Thursday. “With these factors in mind, our sentiment is neutral, as the drop in LNG could mean we see weak cash prices today for the weekend package.”
But a sustained drop below the $2.75 level before the April contract rolls off the board could prove difficult as weather demand remains “elevated compared to climatological normal levels” and storage inventories are low for the time of year.
The Energy Information Administration (EIA) on Thursday reported a 47 Bcf weekly withdrawal from U.S. natural gas stocks that came close to consensus estimates. The 47 Bcf figure compares with an 87 Bcf withdrawal in the year-ago period and a five-year average withdrawal of 56 Bcf.
Total Lower 48 working gas in underground storage stood at 1,143 Bcf as of March 15, 315 Bcf (21.6%) below year-ago levels and 556 Bcf (32.7%) below the five-year average, according to EIA.
The 47 Bcf withdrawal for the week implies the market was 1.6 Bcf/d looser year/year adjusting for weather, according to analysts with Raymond James & Associates Inc. The Raymond James team said the market has averaged 2.7 Bcf/d looser year/year over the past four weeks.
“Longer term, with associated gas production remaining robust, the market needs only modest supply growth from Appalachia (and likely declines in most other gas plays) to balance,” analysts said. “We expect 2019 should prove to be a positive year for natural gas demand as both exports to Mexico and outbound LNG tanker activity ramp up.”
As for the latest weather data, Radiant Solutions reported similar themes in the long-range outlook. Radiant’s latest 11-15 day forecast Friday showed “cool air focused across the Central U.S. and warm anomalies in the Northeast. The period starts with greater coverage and intensity of belows across the central and southern U.S. as the cold air mass from the late six- to 10-day lingers.
“Temperatures then look to warm above normal across much of the East late as ridging over the western Atlantic edges westward.”
In the six- to 10-day time frame, “the period starts with much belows over the East under strong high pressure while low pressure develops over the Rockies,” Radiant said. “As these features progress eastward, the Midwest warms much above normal mid-period followed by the East on Day 9. Another cold air mass lurks in the wake of the low, with belows and much belows returning to the Midcontinent late.”
May crude oil futures were down 81 cents to $59.17/bbl shortly before 9 a.m. ET, while April RBOB gasoline was off fractionally to $1.9153/gal.