With little support from forecasts showing a warm pattern moving in during the first week of April, natural gas futures were trading slightly lower early Tuesday. The soon-to-expire April Nymex futures contract was down 0.5 cents to $2.750/MMBtu at around 8:30 a.m. ET, while the May contract was off 0.6 cents to $2.768.
In its latest 11-15 day forecast Tuesday, Radiant Solutions noted a mix of changes, including cooler trends in the South and warmer trends along the northern tier of the Lower 48.
“It remains a warm pattern with widespread aboves across the Central and Eastern U.S. as the Alaska ridge responsible for cold intrusions in the latter part of March/early April is undercut by a strengthened Pacific jet,” Radiant said. Both American and European models favor a warm outlook but “strongly disagree on the details,” with American guidance “much warmer across the western half and cooler in the South and East.”
The six- to 10-day period, meanwhile, covering Sunday (March 31) through April 4, underwent cooler changes compared to Monday, according to the forecaster.
These changes occurred “within the details of a modest shot of cold air into the Midcontinent and to a lesser extent the East,” Radiant said. “The first half of the period features widespread much belows across the Midcontinent focused in particular from the Mid-South to Texas. The East lingers warm at the onset as a cold front pushes through, with some belows now in the forecast in its wake on Days 7-8. Moderation is expected late in the period with the East warming above normal on Day 10.”
Over the next five days, a stretch that will include the expiration of the April contract, traders can expect some “choppy” action in the market, according to EBW Analytics Group CEO Andy Weissman.
“While this morning’s weather forecast is similar to yesterday’s, we expect trading to be dominated by expiration of April options today and close-out of the April contract tomorrow, which will be affected more by sparring between longs and shorts than by fundamentals,” Weissman said. “After Wednesday, gas prices could be pushed lower by a short period of warmer-than-normal weather but then pushed back by another, very brief cold shot expected near the beginning of the six- to 10-day window.
“By the middle of next week, however, an extended period of warmer-than-normal weather is forecast, potentially extending well into April,” he said. “This warmer-than-normal period could start to drive gas prices lower by as early as a week from now, with continued losses during the first half of April.”
Looking at the supply picture, Lower 48 dry gas production reached 87.99 Bcf/d this past weekend, its highest level since late December, according to Genscape Inc.
“Production since Saturday has been averaging 87.8 Bcf/d and is now running nearly 2.4 Bcf/d greater than the month-to-date low of 85.4 Bcf/d hit March 5,” Genscape senior natural gas analyst Rick Margolin said. “Since that time, Permian Basin production has increased by more than 1 Bcf/d despite unplanned pipeline maintenance tightening takeaway constraints.
“Texas production since early March is also up nearly 1 Bcf/d. The recovery of Rockies production from freeze-offs has output there running more than 0.3 Bcf/d higher, and Gulf of Mexico production is up more than 0.35 Bcf/d with the conclusion of offshore maintenance.”
May crude oil futures were up 97 cents to $59.79/bbl shortly after 8:30 a.m. ET, while April RBOB gasoline was up about 2.2 cents to $1.9594/gal.