Coming off a furious rally the previous session, natural gas futures pulled back early Wednesday as traders were left to ponder the potential effects of mild weather and coronavirus-related demand shocks. The April Nymex contract was off 1.0 cent to $1.926/MMBtu shortly after 8:40 a.m. ET.

The overnight weather data advertised “very little change” in demand expectations day/day, with the major models “in pretty good agreement” on the outlook for the next two weeks, according to Bespoke Weather Services.

“We continue to see the dominance of warmer than normal conditions in the East and South but still see colder weather in the western half of the nation as a result of upper level ridging moving over Alaska and into parts of Western Canada,” Bespoke said. “While this is not impacting the most important areas for natural gas consumption, it does prevent March from moving any higher up the charts as far as warmest Marches in the historical record.”

Looking back at Tuesday’s rally, analysts at EBW Analytics Group noted that support near $1.847 held for the April contract “despite a benign weather forecast.”

The recent gains continue to reflect “a belief that steep” capital expenditure cuts from U.S. shale producers “will result in quick, steep declines in production of associated gas, tightening the natural gas market,” the EBW analysts said. “In addition, with a massive short position still outstanding, short-covering may also have played an important role.”

The latest guidance heading into Wednesday’s trading left the weather-driven demand picture for gas largely unchanged, but the potential demand shocks from the coronavirus still loom large over the economy as a whole, according to EBW. They cited reported comments from European Central Bank President Christine Lagarde warning “that the global economy faces a major economic shock unless immediate action is taken.”

On the exports front, the introduction of feed gas to Train 3 at the Freeport liquefied natural gas (LNG) terminal, part of the final commissioning stage for the facility located on Quintana Island on the Texas coast, could add about 0.6 Bcf/d of demand for the U.S. market, according to Tudor, Pickering, Holt & Co. (TPH).

“However, more LNG supply is the opposite of what the global market needs, as pricing has dipped to all-time lows and demand is quickly peeling off as we move into shoulder season,” TPH analysts said in a note to clients Wednesday. Average Dutch TTF (aka Title Transfer Facility) strip pricing for the second and third quarters would “effectively” put U.S. LNG exports “on the margin, with an estimated spread of around 2 cents/MMBtu on a variable cost basis, assuming gas is sourced at a price equal to Henry Hub.”

Japan-Korea Marker (JKM) strip pricing over the same time frame would put U.S. LNG “out of the money on a variable cost basis,” according to TPH.

Continuing a tough week for crude, April WTI futures were down $1.21 to $33.15/bbl shortly after 8:40 a.m. ET, while April RBOB gasoline was trading about 3.3 cents lower at $1.1239/gal.