A persistently warm March pattern in the latest weather data kept the pressure on natural gas futures in early trading Friday. The April Nymex contract was down 3.2 cents to $1.740/MMBtu at around 8:30 a.m. ET.
The latest guidance led Bespoke Weather Services to adjust its forecast “marginally” warmer. But this may be enough to put this month on track to become “the third warmest March in the historical record,” the forecaster said.
“The pattern continues to be above to much above normal over the entire area from the Plains to the East and down into the South,” Bespoke said. “We do see some modest below normal temperatures now showing up in parts of the West from the middle of the six to 10 day period into the 11-15 day.
“We believe models may be overdoing the intensity of cold even here, but it may be just enough to keep us from catching 2016, which was the second warmest March on record. These discussions sound quite repetitive, but that is simply because this pattern type just refuses to change and is not showing signs of notable change even heading into late March.”
Meanwhile, the Energy Information Administration (EIA) Thursday reported an on-target 109 Bcf withdrawal from U.S. gas stocks for the week ended Feb. 28, close to the five-year average of 106 Bcf but lighter than the 152 Bcf withdrawal recorded last year.
Total Lower 48 working gas in underground storage stood at 2,091 Bcf as of Feb. 28, 680 Bcf (48.2%) higher than year-ago stocks and 176 Bcf (9.2%) above the five-year average, according to EIA.
“The good news is this week’s storage print was in line with consensus and the five-year average” despite total degree days coming in 4% below five-year norms, analysts at Tudor, Pickering, Holt & Co. (TPH) said in a note Friday. “The bad news is despite flow data showing a roughly 1 Bcf/d drop in supply this week, it comes almost entirely from Texas (800 MMcf/d), where Waha prices dipped into the negative, suggesting the drop in supply is not resulting in a tightening of the supply/demand balance but rather that seasonal demand is eroding, stranding the gas.”
The potential “ugly” news could come from next week’s EIA print, according to the firm. TPH estimates point to a 51 Bcf draw, which would grow the surplus to the five-year average from 9% to 14%, leaving “an 18% surplus to exit March still in the cards.”
Genscape Inc. estimated this week’s reported draw as about 1.6 Bcf/d tighter than the five-year average when compared to degree days and normal seasonality.
“Once again, it is difficult to reconcile this week’s reported storage change versus last week, with a reported withdrawal falling 34 Bcf week/week compared to a decline in demand of more than 50 Bcf driven by roughly 30 fewer degree days,” Genscape analyst Eric Fell said. “This week’s stat essentially confirms that the last two storage stats were indeed a case of weekly EIA inventory true-up, with the withdrawal from two weeks ago being overstated, which led to last week’s withdrawal being understated.
“This is one reason not to put too much stock in a single storage number. Instead, it is preferred to look at a string of several weeks in order to reduce the noise from bad data.”
April crude oil futures were down $1.82 to $44.08/bbl at around 8:30 a.m. ET, while April RBOB gasoline was off about 6.3 cents to $1.4591/gal.