After a quiet start, increased selling late in Friday’s trading session led to another day of pronounced swings in the natural gas futures market. The May Nymex contract capped the week at $1.746, down 6.9 cents from Thursday’s close. June dropped 4.7 cents to $1.895.

Spot gas prices also were lower across the United States, led by a sharp pullback out West and solid decreases on the East Coast. NGI’s Spot Gas National Avg. fell 12.0 cents to $1.585.

After four consecutive days of 10-cent-plus moves, early trading indicated a much quieter end to the week. However, declines steepened later in the day as weather forecasts continued to show moderating temperatures heading into May. Extensive declines in the cash market also likely aided in the selling.

“The problem continues to be very low demand thanks to the economic shutdowns, leading to a balance that would easily result in a complete filling of storage by this fall,” Bespoke Weather Services said. “Obviously, things can change significantly, as we know at some point the economy will gradually come back, and drops in production are likely, but the timing will be critical in avoiding the risk of running out of storage space.”

Until there are signs of these changes, it is difficult for Bespoke to be bullish at the front of the curve. “That said, price action could remain quite erratic, so we would continue to advise caution if trading this market currently.”

For now, natural gas traders continued to look to the latest government storage data for some clarity on the demand impacts from the coronavirus. The Energy Information Administration’s (EIA) 43 Bcf injection trailed historical norms, but lifted working gas in storage to 2,140 Bcf, 827 Bcf above year-ago levels and 364 Bcf above the five-year average.

Tudor, Pickering, Holt & Co. (TPH) analysts said natural gas demand, at least so far, has been relatively immune to the destruction seen across other fuels. “Our dissection of the demand data shows a Covid-19 related impact of just around 0.3 Bcf/d across the big three demand drivers of power, industrial and residential/commercial.”

The data suggests that gas is being “largely insulated by coal, which is taking the brunt of the demand hit,” according to TPH. “If these demand trends continue, it should be quite constructive for gas as oil shut-ins accelerate a drop in supply.”

Genscape Inc. had a different opinion. The analytics firm said that compared to degree days and normal seasonality, the 43 Bcf injection appears loose by approximately 8.9 Bcf/d versus the prior five-year average.

The EIA figure “is the loosest weather adjusted storage report in our data set going back to 2005,” Genscape senior natural gas analyst Eric Fell said.

Fell noted “an interesting comparison” in storage for the week ending April 17 versus the week ending March 12, “which was just before the impacts of Covid began to impact demand.” The latter storage week was a bit colder than the week of March 12, “yet we injected 53 Bcf more,” Fell said. The EIA reported a 9 Bcf withdrawal for the week ending March 12.

According to Genscape’s models, net supply explains around +3 Bcf of the difference, and a decline in exports explains another 11 Bcf.

“The big story is that gas demand fell by around 40 Bcf compared to the week of March 12 despite that it was actually a few degree days colder,” Fell said. “We are witnessing a demand destruction event of epic proportions.”

Genscape data shows that weather-adjusted power loads are down more than 10% in the Northeast, Midwest and California, areas that have been hit the hardest by Covid-19, while various industrial indicators also have declined sharply over the last few weeks. This massive demand shock occurring now is driving the extreme looseness the market is seeing today, according to the firm.

“The good news is that we are projecting a massive supply response that will tighten the gas market as production declines kick in. The bad news is the gas market is extremely loose at the moment and needs a large supply decline just to get back to normal, or a large recovery in demand,” Fell said.

Raymond James & Associates is of the opinion that the worse things get for oil, the better they get for U.S. gas. Its new lower oil price forecast of $38/bbl for West Texas Intermediate crude implies “a lot less” U.S. associated gas production in the second half of the year, and especially in 2021.

In fact, although U.S. associated gas volumes are to increase in 2020 as a result of the massive 2019 exit rate, given the current oil price environment and Raymond James’ updated rig projections, which show rigs falling from around 800 rigs at year-end 2019 to around 390 rigs by year-end 2020, U.S. associated gas is poised to see a roughly 2.1 Bcf/d decline in 2021.

“However, the Covid-19 pandemic that’s obliterating oil markets is likely to also result in a decrease in U.S. natural gas demand, both domestic and international, which is important for U.S. LNG exports,” analysts said.

For 2020, the Raymond James team is modeling the U.S. gas demand impact from the pandemic to average around 3 Bcf/d, peaking in mid-year. This, they say, would result in Henry Hub gas prices remaining below the $2 mark in 2020.

“As we near the end of this year, we -- and pretty much everyone else -- are hoping global demand normalizes,” the Raymond James team said. “This alone could cause U.S. natural gas prices to creep above $2.00.”

For full year 2020, the firm is projecting an average Henry Hub price of $1.90, which is down from the firm’s previous forecast of $2.30. Looking further ahead, and barring a lingering recession due to the “knock-on” effects of the pandemic, Raymond James thinks a partial “snap back” in economic activity and a massive decline in U.S. gas supply in 2021 should result in significantly higher prices next year.

“We expect an average Henry Hub price of $3.50 for next year and anticipate gas reaching the $4.00 threshold in 4Q21, with 10-15 cents further upside potential if our team is too optimistic on oil prices.”

Lower Cash

While forecasting the future price of gas comes with unprecedented challenges from the oil market downturn and coronavirus, pricing gas for the next three days proved a bit more manageable given the generally mild demand across the Lower 48.

Though some chilly weather remained in the outlook for the East Coast through the weekend, springtime temperatures were set to blanket much of the South and Texas. Hotter conditions were in store for the West Coast, but robust renewable energy limited demand for natural gas.

SoCal Citygate prices for gas delivered through Monday plunged 34.0 cents to $1.505, while smaller losses were seen throughout the rest of the state.

In the Rockies, some pipeline maintenance in the region prompted sharp declines on Transwestern Pipeline and El Paso Natural Gas (EPNG), but the entire region ended the day in the red.

Permian Basin pricing also came under pressure from the Transwestern and EPNG maintenance, with extensive losses of more than 40 cents seen across the region. Waha spot gas plunged 48.5 cents to average 68.5 cents for delivery through Monday.

Other Texas markets fell anywhere from a nickel to as much as 25.0 cents.

In the chilly Midwest, Chicago Citygate cash was down 7.0 cents day/day to $1.755, while Transco Zone 6 NYdropped 15.0 cents to $1.640.