Despite an increase in weather-driven demand expectations over the weekend, technical factors and broader bearishness across the energy sector helped keep the pressure on natural gas prices in early trading Monday. The May Nymex contract was down 2.6 cents to $1.727/MMBtu at around 8:30 a.m. ET.

On Friday, natural gas futures extended their rally to cap off a week in which the coronavirus pandemic continued to decimate demand and producers snatched more rigs off the field. The May Nymex gas futures contract settled Friday at $1.753, up 6.7 cents from Thursday’s close. June rose 5.8 cents to $1.903.

Spot gas prices finished the week mostly higher as the latest weather forecasts pointed to some lingering chilly weather in the coming days. Despite losses across West Texas, NGI’s Spot Gas National Avg. climbed 9.0 cents to $1.480.

Coming off a notable 8.8-cent increase on Thursday, it is clear that Friday’s follow-through for futures was driven, at least in part, by factors other than demand. Although the most recent weather data did point to some cooler weather for the first half of each of the final weeks of April, Bespoke Weather Services said that “we continue to head into what will be a very low demand time of year, as the strong cold relative to time of year departs over the next few days, leaving us with a variable, near-normal regime.”

Meanwhile, the latest government storage data pointed to further demand erosion due to shutdowns in place to slow the spread of Covid-19. The Energy Information Administration’s (EIA) reported 73 Bcf injection boosted inventories to 2,097 Bcf, 876 Bcf above year-ago levels and 370 Bcf higher than the five-year average.

“It was a bearish print by all measures, but the market shrugged it off,” said analysts at Tudor, Pickering, Holt & Co. (TPH). The analysts said it appears that investors were “simply waiting for the ugly print to pass before stepping in” as balance for the next EIA report is trending “much better and producers continue to announce material shut-ins.”

The TPH team currently is modeling a 45 Bcf build for the EIA reporting week ending April 17, with the residential/commercial sector being the “game changer,” up about 5 Bcf/d week/week.

“On the demand side, we’re still struggling to see any material Covid-19 impacts, as despite total electricity generation being down, gas demand for power continues to track above last year’s levels, indicating other power sources are taking the hit, which isn’t surprising given where gas is currently priced.”

This could open the door for a move back above $2 sometime in May as shut-ins accelerate in the coming weeks, according to TPH.

Indeed, the latest rig data pointed to more supply coming off in the months ahead and may have had a hand in Friday’s rally. NatGasWeather pointed out that the May Nymex contract “rocketed higher” by 10 cents early in the session but then sold off. However, prices then gained a few cents back after the latest Baker Hughes Co. rigs report was released.

The data showed “another massive drop” in oil rigs by 73 and a “hefty drop” of seven gas rigs, with the total number of U.S. rigs now nearly 500 below the year-ago total of 1,012.

“This suggests a significant decrease in natural gas production is in the cards,” NatGasWeather said. “But when will it be strong enough to counter strong demand losses due to Covid-19?”

Meanwhile, money managers continued to increase their bullish natural gas bets, boosting their net-long positions by 23,624 to 95,673, according to the latest Commodities Futures Trading Commission data. The net-long position was the most bullish in almost a year, while the 324,569 long-only positions was the highest in more than a year.

With the May contract rallying nearly 4%, and some optimism regarding the gradual reopening of the economy, “this will be a slow process, and it is not clear how much this even factored into the price action, given what we saw in markets such as oil,” Bespoke said.

“If we rally much more from here, risk is that sellers will again step back in.”

With cold weather hanging on for a bit longer, spot gas prices across most of the United States strengthened Friday. Lows in the 20s and 30s were forecast to “rule” the central and northern states through the early part of the week as cool shots sweep through for relatively strong late-season heating demand, according to NatGasWeather.

Recent data has been “a touch cooler” with a system over the Northeast early in the week, “but far from cold,” the firm said. Meanwhile, the southern part of the country is expected to warm back into the “near-ideal” 70s and 80s.

While the pattern is “just cold enough” through in the week, cold air is still expected to retreat into Canada after, “with highs of 50s to 70s returning to the Midwest and Northeast, including near 70 from Chicago to New York City, easing national demand to light levels,” NatGasWeather said.

For now, though, it was enough to support a bounce in cash in most markets across the Lower 48.

In the Northeast, Iroquois Zone 2 prices for gas delivered through Monday jumped 14.0 cents to $1.665. Columbia Gas in Appalachia was up 16.5 cents to $1.585.

The Midwest’s Chicago Citygate shot up 19.5 cents to $1.720 for the three-day gas delivery, while NGPL Midcontinent soared by some 16.0 cents to $1.375.

Benchmark Henry Hub cash rose 14.5 cents to $1.695, similar to gains seen across most of Texas.

The exception in the Lone Star State was in the western region, where cash prices came crashing down by more than 20 cents. Waha fell to a 17.0-cent average, with some transactions seen as low as zero.

Some losses also were seen on the West Coast, where SoCal Citygate prices for gas delivered through Monday slipped 7.5 cents to $1.440.

Southern California Gas (SoCalGas) on Thursday announced the final approval of a 40-year agreement with the Morongo Band of Mission Indians regarding two high-pressure lines that cross the Morongo Reservation near Cabazon, CA. This ensures that ample import capacity on SoCalGas’ Southern Zone will remain available, according to Genscape Inc.

The rights-of-way for Lines 5000 and 2001 are officially renewed under this agreement, which had been pending final approval by the Bureau of Indian Affairs for about 16 months but continued to flow in the interim.

Over in the Rockies, Rockies Express Pipeline (REX) was to begin planned pipeline work Saturday that could limit up to 154 MMcf/d of receipts in northern Colorado and potentially restrict eastbound flows through May 18, Genscape analyst Anthony Ferrara said. Various interstate interconnects, receipt points, and segments were to be restricted throughout the month-long maintenance in the Cheyenne area.

The work being performed will limit flows through SEG 200 to 1,700 MMcf/d from April 18 through May 2, and then to 1,383 MMcf/d from May 3 through May 12. “At current flow levels, neither of these restrictions will come into play as SEG 200 has only averaged 757 MMcf/d over the past 30 days,” Ferrara said.

Furthermore, receipts onto the pipeline could be restricted by up to 154 MMcf/d due to shut-ins at the “WIC Sitting Bull” location and the “CHEY Crazy Bear Weld” location.