After a successful attempt at breaching $1.80/MMBtu, May natural gas futures slammed the brakes as widespread demand losses from Covid-19-related shutdowns continued to dominate markets. However, volatility remained high and the prompt month went on to settle Monday at $1.724, off only nine-tenths of 1 cent from last Thursday’s closing price. June climbed 1.6 cents to $1.879.

Spot gas prices posted a solid recovery to start the week, with West Texas leading widespread gains amid a late-season cold snap. NGI’s Spot Gas National Avg. climbed 12.0 cents to $1.605.

Natural gas futures made a decent run out of the gate Monday as the May contract rose above the $1.80 level early in the session. However, weather models didn’t deviate much from last week overall as demand shifted around a bit for the next 15 days, keeping cold in the forecast for this week and then turning milder thereafter, according to Bespoke Weather Services.

“The problem in sustaining the move was that a front-led rally seemed the least logical, given how obscenely loose the market currently is and no clear sign that the economic shutdowns will be ending anytime soon,” Bespoke said. “Add in what is likely to be a significant number of power outages from the current eastern storm, and the picture is not pretty in terms of the supply/demand balance.”

Also weighing on the natural gas market are talks of reopening the U.S. economy in May and the implications of the agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut oil production, according to EBW Analytics Group. While the OPEC-plus agreement may give oil prices a brief boost, it is too little too late to prevent domestic oil prices from collapsing, the firm said.

“The issues facing the natural gas market, however, are complex and difficult to assess. Over the next few days, we expect price volatility to be high as the market tries to sort out a unique, high-stakes set of issues.”

Meanwhile, the string of upcoming storage inventory reports may induce some additional swings as the market gets further confirmation of the demand destruction brought on by restrictions to slow the pandemic. The front end of the Nymex curve dropped 5.0 cents last Thursday after the Energy Information Administration (EIA) reported that inventories grew by a much larger-than-expected 38 Bcf. The first build of the year boosted working gas in storage to 2,024 Bcf, 876 above year-ago levels and 324 Bcf above the five-year average, according to EIA.

However, with the potential for U.S. oil production cuts and a reduction in associated gas output over the coming months, the winter strip and beyond continued to strengthen. The calendar year 2021 strip, for example, currently sits north of $2.60.

In order to keep a bid under longer-dated prices, the next eight to 10 weeks would need to avoid seeing a string of triple-digit injections, according to Mobius Risk Group. If this can be achieved while the market awaits the supply side effect of sub-$30/bbl U.S. crude and sub-$2.00 gas, it could mean the balance of 2020 has seen its worst, the firm said.

“However, if the next eight to 10 weeks are marred with more than five or six triple-digit builds, a conversation about the probability of reaching 4 Tcf will escalate,” the Houston-based firm said.

Enverus analysts noted, however, that even with above-average gas inventories at the end of the injection season, prices would need an uptick in the back half of the year to fulfill winter heating demand as the market recovers from Covid-19. Furthermore, production would need to grow in dry gas areas to offset the expected loss in associated gas, the firm said.

EBW pointed out that the time lag between price signals and production response historically has been a six- to 10-month lag, but is likely to be much faster in 2020 as a lack of physical space forces faster course correction. “While output declines may not peak until late 2020 or early 2021, associated gas may eventually sink by 2.75-7.0 Bcf/d as oil is shut in, likely setting up an undersupplied natural gas market for 2021.”

For now, though, any front-of-the-curve-led rally in the gas market will have a difficult time being sustainable until tighter balances materialize or there is a more definitive bullish catalyst, according to Bespoke. “The curve structure is quite bullish should the backdrop change, however.”

Spot gas prices were on the rise to start the week, mounting solid gains of more than a dime across the majority of pricing hubs as demand was set to recover in a big way from the holiday weekend lull.

NatGasWeather projected a frigid late-season cold shot to push into the central and northern United States over the next couple of days. The chillier pattern was to drop overnight lows below freezing in those areas, including 20s and 30s into North Texas and portions of the South, the firm said. A reinforcing cold shot was also expected to follow Thursday-Friday to keep the colder-than-normal pattern going through next weekend for continued strong national demand.

The bump in demand boosted next-day gas prices in West Texas by more than 20 cents across the board. El Paso Permian shot up 31.5 cents to average 42.5 cents.

Sharp increases also were seen in the Midcontinent producing region, where Southern Star rose 19.0 cents to $1.690.

Benchmark Henry Hub spot gas prices climbed 8.0 cents to $1.780, while prices in the Southeast were up as much as 15.0 cents.

In Appalachia, Transco-Leidy Line cash rose 14.0 cents to $1.395. Transco Zone 6 NY jumped 18.5 cents to $1.490.

Meanwhile, the spring maintenance season is in full swing, with 17 gas pipeline maintenance events scheduled to begin Monday and 22 to kick off Tuesday, according to Genscape Inc. The firm noted, however, that compared to the past two years, this spring’s maintenance events are expected to have a milder impact on flows.

Analysis of the past two years showed the total flow impact this April and May is expected to be roughly 70% of 2019 and 85% of 2018, with the biggest decrease in the Appalachia region.

“Maintenance events are frequently revised or delayed, and the flow impact doesn’t take into account the possibility of rerouting gas onto other pipelines,” Genscape analyst Dan Spangler said.

One such maintenance event is set to begin Tuesday, with Transcontinental Gas Pipe Line (aka Transco) conducting an equipment outage at its Washington Storage Facility in St. Landry Parish, LA. During the outage, scheduled to last through next Monday (April 20), Washington Storage will not be available for injection.

This facility has been net withdrawing since March 24 and has averaged 129 MMcf/d and maxed at 162 MMcf/d over the last two weeks, according to Genscape. Washington inventory levels are at 51.9 Bcf, 68.7% full and 20.2 Bcf higher year/year, the firm said.

“2019 storage was the lowest since 2014, but a weak withdrawal season leaves inventory levels at their highest level since 2016,” Genscape analyst Josh Garcia said. “Withdrawals will still be available, but Transco will have limited ability to manage imbalances during this period.”