One day after an oil market tailspin sent natural gas futures exploding higher, May natural gas stopped to catch their breath before going on to nosedive.

After trading both sides of even, the May Nymex gas futures contract settled Tuesday at $1.821, down 10.3 cents day/day. The losses extended through November, with small gains seen further out the curve.

Spot gas prices climbed across the board as a series of cool shots boosted demand. Led by a major rebound at Waha that lifted prices back into positive territory, NGI’s Spot Gas National Avg. jumped 34.0 cents to $1.655.

The chilly outlook for the eastern United States was a mainstay in the latest weather forecasts as only “very minor” detail changes were seen as models converged, according to Bespoke Weather Services. The firm continues to see a bias toward below-normal temperatures in the Midwest and Northeast into the start of May, with above-normal to much above-normal temperatures common from the Plains back into the West. There’s also the potential for some record heat in parts of the Southwest, according to Bespoke.

“As we head through the month of May, we believe some of this heat spreads over toward Texas and perhaps the Southeast, possibly generating some notable early cooling degree days in these regions, while a cooler bias could continue up north,” the forecaster said.

With the May contract giving back more than half of Monday’s gains, Bespoke said the look of the futures curve makes a bit “more sense” now, since demand destruction from the coronavirus pandemic is still ongoing.

“The real bullishness in the natural gas market should be later, which is now how things are priced. That said, this market is likely to be volatile, and there will be more moves that may not make sense given the actual data,” Bespoke said.

With West Texas Intermediate (WTI) crude oil prices for May rolling off the board $47.64 higher at $10.01/bbl, but June falling an additional $8.86 to a $11.57/bbl settlement, a “draconian” reduction in crude output would appear to be needed, according to Mobius Risk Group. Along with a reduction in crude output there should be a sequential reduction in natural gas supply “likely not seen in the shale era,” at least outside of weather-driven supply losses, the firm said.

“Interestingly, the natural gas market may offer the tell for whether or not crude supply is actually dissipating. With daily natural gas pipeline flow data available in most areas, other than those only served by intrastate capacity, there should be an observable difference in 11 days or less.”

Production has remained well off its November highs, and Tuesday’s early data indicated a further 1 Bcf/d decline, though the most recent cut may be tied to pipeline maintenance given the time of year.

Meanwhile, Mobius said “invigorated interest in holding length in Nymex natural gas” extended throughout the term structure on Monday and again on Tuesday, with the Calendar Year 2021 strip climbing to $2.73 and the 2022 strip managing to climb back to the $2.50 mark. The next three calendar year strips averaged near $2.45.

“We would argue that a five-year strip at little more than $2.50 on average is likely not enough to stimulate significant production growth and thus containment risk could still be in play late this fall, yet longer term, there should be strong consideration as to whether the market can balance on a still steady flow of demand gains,” Mobius said.

For now, analysts agree that volatility could remain high amid ongoing shutdowns related to Covid-19, with increased scrutiny on the Energy Information Administration’s (EIA) weekly storage inventory reports. The past three consecutive EIA reports have reflected larger-than-expected storage withdrawals, with inventories now sitting at 2,097 Bcf, which is 876 Bcf higher than last year at this time and 370 Bcf above the five-year average.

For the upcoming EIA report on Thursday, analysts are projecting a build somewhere in the 40 Bcf range, which would come in far below the year-ago injection and thus provide “a material reduction” in the year/year storage surplus, according to Mobius. Furthermore, daily data for the current week, which is to be reflected in the April 30 EIA report, indicates a “very low risk” of topping triple-digits and a possibility that the build would be less than 75 Bcf.

While there are still a few milder days left in the week that could alter the projection, “considering the comparable week last year saw an injection of 114 Bcf, there should be consecutive storage surplus reductions,” Mobius said.

Following the string of bearish misses in the storage data, Bespoke said the supply/demand balance cannot continue, as it points to an end-of-season storage level at an “impossible” 5.1 Tcf. The key issue, according to the firm, remains when the economy is able to come back, which is not yet clear, although some limited reopenings are said to be allowed soon.

“For this week specifically, our estimate stands at 41 Bcf, smaller than last week by quite a bit due to the week ending April 17 containing much higher weather demand,” Bespoke said.

The firm reiterated its bullish stance for later this year given the risk of more production declines, and possible bullish summer weather, “but the near term is much trickier.”

Much like Appalachian markets that predated a massive pipeline expansion in the region, Permian Basin prices have marched to the beat of their own drum as gas supply continues to outpace takeaway.

Last April, the absence of demand collided with robust gas production to send Waha cash down to a record minus $9.00 before going on to settle at minus $5.75.

On Monday, Waha spot gas sunk to a new low of minus $10.00 before going on to settle the day at an average of minus $4.740. The move deep into the negatives occurred in the face of widespread gains across the rest of the Lower 48 and occurred as U.S. crude prices spiraled into uncharted territory.

Analysts struggled to say with certainty whether Monday’s plunge in Waha pricing was carryover from the unprecedented WTI slide, since much of the WTI May contract’s deterioration occurred later in the day.

“That said, there is no real precedent” for Monday’s oil price collapse “into deeply negative territory,” said Genscape Inc. natural gas analyst Joseph Bernardi.

However, there were some gas flow restrictions on various pipelines that may have had a hand in Permian pricing sinking to new lows. The analyst indicated that El Paso Natural Gas’ deliveries to Kinder Morgan Texas Pipeline dropped off significantly, flipping from a prior month-to-date average delivery of 173 MMcf/d to a receipt of 43 MMcf/d, a 216 MMcf/d swing. El Paso’s deliveries to Gulf Coast Express also posted initial day/day declines of 100 MMcf/d, while Northern Natural Gas Pipeline’s net receipts from Oasis Pipeline ramped up by 105 MMcf/d.

In the case of Gulf Coast Express (GCX), maintenance has been ongoing since April 7. Yet Waha next-day gas recovered much of Monday’s losses, soaring $5.025 day/day to an average 28.5 cents on Tuesday. El Paso Permian experienced a similar rally, although the GCX work is not expected to wrap until the end of the month.

Other Texas cash prices also were on the rise, but gains were more in line with other markets across the country. Houston Ship Channel spot gas jumped 13.5 cents to $1.870.

Creole Trail Pipeline was to begin planned filter maintenance Wednesday at its Transco-Gillis station, which is expected to restrict all operational capacity at the Transco-Gillis station, potentially jeopardizing 400 MMcf/d in Creole Trail deliveries to Sabine Pass liquefaction facilities. However, it is unlikely the maintenance event, set to last until May 2, will significantly impact Sabine Pass LNG operations because of ample operationally available capacity nearby, according to Genscape analyst Preston Fussee-Durham.

Spot gas increases of 5-15 cents were the norm across the Midcontinent, Midwest, Louisiana and the Southeast. Henry Hub climbed 16.0 cents to $1.870.

Further east, Dominion South cash was up 8.5 cents to $1.660, while the chilly air hovering over the Northeast boosted prices there considerably more. Algonquin Citygate shot up 25.0 cents day/day to $2.050.

Out West, Trailblazer Pipeline declared a force majeure at its compressor station 603 that would require capacity through Segment 40 to be reduced and put at risk primary and secondary firm quantities.