Natural gas futures were trading slightly lower early Friday as analysts found signs of Covid-19 demand destruction in the latest government inventory data. The May Nymex contract was down 1.1 cents to $1.541/MMBtu at around 8:45 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a smaller-than-expected 19 Bcf withdrawal from storage inventories for the week ending March 27. The reported draw compares with last year’s 6 Bcf injection for the similar week and matches the five-year average withdrawal of 19 Bcf.
This week’s EIA print indicates the market was 3.1 Bcf/d looser than the five-year average when compared to degree days and normal seasonality, according to Genscape Inc.
The firm’s supply and demand modeling “clearly” showed a “large week/week decline in gas demand that was unrelated to weather,” senior natural gas analyst Rick Margolin said. “Given that weather, net renewable generation and gas prices were nearly unchanged versus the prior week, a meaningful portion of the week/week decline in demand appears to be attributable to demand destruction from Covid-19. Total power generation across the Lower 48 fell by 3% week/week, while Lower 48 total degree days were essentially flat.”
Tudor, Pickering, Holt & Co. (TPH) analysts estimated 2 Bcf/d of oversupply based on the latest EIA print.
“Flow data for the current week (next week’s report) shows demand off nearly 7 Bcf/d week/week, led by a 3 Bcf/d drop in residential/commercial as heating season comes to a close,” the TPH analysts said. “With the demand drop, yesterday’s print will almost certainly be the final draw of the year, with cumulative winter season draws falling 5% short of the five-year average on degree days that were 4% below norms.”
As for the latest forecasts, Bespoke Weather Services observed “another round of colder changes” in its outlook as of early Friday. Trends have been in the colder direction over the past three days, the forecaster said.
“We have further cooled all of the eastern half of the nation starting in the back of the six- to 10-day time frame and lasting through the middle of the month, in response to more of an upper level ridge along the west coast of North America up toward Alaska, which pushes a colder trough southward into the Midwest,” Bespoke said. “While we do see some increased support from the projected tropical forcing patterns, we remain cautious given that the best chill in modeling (relative to normal) is still out in the 11-15 day period.”
May crude oil futures were trading $2.79 higher at $28.11/bbl at around 8:45 a.m. ET, while May RBOB gasoline was up about 8.3 cents to around 74.6 cents/gal.