• Aprily Nymex futures down 0.2 cents to $1.602/MMBtu
  • Bullish natural gas sentiment from from collapse in oil prices “hasn’t taken hold in the market,” says Enverus
  • “Since freeze-offs from February began to abate, production has held remarkably steady this month-to-date, averaging 93.3 Bcf/d”: Genscape
  • “We project that 2020 oil demand will fall 2.8 million b/d (2.8%), the largest single-year drop in nearly 40 years,” says Morningstar’s Caldwell

Riding the waves of economic unease in the face of a growing pandemic, natural gas futures turned in an up-and-down day of trading Monday before settling close to unchanged. The April Nymex contract traded as low as $1.519/MMBtu, then rebounded to as high as $1.628, ultimately finishing at $1.602, off 0.2 cents.

In the spot market, spring temperatures accompanied widespread discounts, sending NGI’s Spot Gas National Avg. 5.0 cents lower to $1.445.

The bullish sentiment for natural gas following the collapse in oil prices “hasn’t taken hold in the market,” according to analysts at Enverus. “Natural gas prices have traded between $1.60 and $2.00 since the news and broke below that range in early trading” on Sunday, “falling as low as $1.519.

“...However, with numerous companies announcing less ambitious drilling plans in 2020 because of poor oil economics, associated gas production is expected to decline throughout the year,” they said. “Some of the associated gas that would normally fall off at current price levels will still hit the market, as operators have hedges in place and will continue to produce. As operator hedges roll off, liquids storage begins to fill, and the market still sees poor production economics, operators will stop completing oil-directed wells and associated natural gas production will decline.”

Looking nearer term, Genscape’s estimate for Lower 48 dry gas production totaled 93.26 Bcf/d for Monday.

“Since freeze-offs from February began to abate, production has held remarkably steady this month-to-date, averaging 93.3 Bcf/d and having stayed within a range of 92.2 Bcf/d on the low end and 94 Bcf/d on the high side,” Genscape senior natural gas analyst Rick Margolin said. “Compared to February, month-to-date production is running about 0.39 Bcf/d stronger.”

Genscape estimates show production increased primarily driven by gains in the East, and in Ohio in particular. Texas production is also up slightly from February levels. Those increases have helped to offset a roughly 75 MMcf/d month/month decline from the Rockies and a roughly 57 MMcf/d drop in the Midcontinent, according to the firm.

On the demand said, Genscape said Monday that volumes delivered to Lower 48 liquefied natural gas (LNG) terminals have “rebounded with a vengeance” over the past few days.

“Since Saturday, aggregate feed gas deliveries have been well in excess of 9.1 Bcf/d, with Saturday’s volumes setting a 50-day high by flirting with the 9.2 Bcf/d mark,” Margolin said. “In the middle of last week, volumes had fallen off a cliff to a 126-day low of 6.3 Bcf/d due to several train outages” at the Sabine Pass and Corpus Christi terminals.

“All trains at all six export terminals now appear to be running normally.”

As for the weather outlook, NatGasWeather reported no major changes to its forecast based on updated data Monday.

“There will continue to be weak glancing cool shots across the northern U.S. into early April; they just aren’t looking like they’ll tap any meaningful subfreezing air over Canada,” NatGasWeather said. “But what makes the pattern rather bearish is the first several days of April are currently forecast to have nearly ideal highs of 60s to 80s across most of the U.S. and very little to no coverage of 30s.”

$10-15 Crude?

May crude oil futures pared some of their losses Monday, recovering 73 cents to settle at $23.36/bbl. But the outlook for oil remains bearish, to say the least. Operators continue to slash spending as the coronavirus pandemic and a price war between Russia and the Organization of the Petroleum Exporting Countries (OPEC) has collapsed prices.

“In the near term, we agree that investors have every reason to be worried,” said Morningstar Equity Research analyst Preston Caldwell. “We project that 2020 oil demand will fall 2.8 million b/d (2.8%), the largest single-year drop in nearly 40 years.

“Because oil producers cannot adjust overnight, global oil markets are likely to be oversupplied on the order of 3.3 million b/d in 2020, which dwarfs the excess seen in the 2014-16 downturn.”

Enverus analysts said talk of crude falling to $10-15 has been “permeating conversations” among traders and analysts.

“Given the inability of non-OPEC production to respond quickly to the precipitous drop in global oil demand just as Saudi Arabia and others ramp up production, inventory builds in April and May are expected to be historically unrivaled in both the size and the speed at which they develop,” the analysts said.

Spring Discounts

Northeast hubs led a wave of discounts across the Lower 48 Monday as widespread coverage of near- or warmer-than-normal temperatures the next few days promised limited demand.

Parts of eastern New York state and New England were experiencing an early spring snowstorm Monday, with the storm expected to strengthen along the Mid-Atlantic coast before moving off the southern New England coast Monday night into Tuesday, according to the National Weather Service (NWS).

Maxar’s Weather Desk called for below-normal temperatures in Boston and New York City Monday to give way to above-normal conditions by Tuesday, including highs in the low to mid-50s.

Algonquin Citygate tumbled 11.0 cents to average $1.495 Monday, while Transco Zone 6 NY dropped 10.0 cents to $1.410.

Meanwhile, Western U.S. hubs mostly headed lower as a cold front moving through the region failed to lift prices. Northwest Sumas eased 3.5 cents to $1.475, while Kern Delivery shed 4.0 cents to $1.595.

“A strong cold front will be dropping southeastward from the Pacific Northwest” Monday before moving “across the Northern Rockies, Great Basin and as far south as Southern California by early Wednesday,” the NWS said. “This front will keep temperatures below average for the beginning of the work week across much of the West to the west of the Rockies, along with showery low elevation conditions and snows at higher elevations.

“In contrast to the below-average western temperatures, above-average temperatures will encompass the Plains, the South, Southeast and Florida over the next several days.”

Discounts were also the norm for many Gulf Coast, Midcontinent and Southeast locations. Henry Hub slid 4.0 cents to $1.635.