• Signs of spring point to lighter demand
  • Traders continue to weigh anemic storage pulls
  • Production recovers faster than demand from Texas storm

The hangover of another anemic government inventory assessment weighed down natural gas futures on Friday. The April Nymex contract fell 6.8 cents day/day and settled at $2.600/MMBtu. It marked the seventh time in eight days the prompt lost ground. May shed 6.7 cents to $2.636.

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NGI’s Spot Gas National Avg., meanwhile, gained 11.0 cents to $2.605 ahead of an expected weekend cold snap in the Northeast.

Forecasts on Friday called for cooler temperatures over the weekend and to start the week ahead, only to warm again later in the period and remain comfortable the following week. This is expected to result in expectations for a net national demand loss in both weeks, according to EBW Analytics Group.

The firm noted that production this month has recovered from hits endured during the infamous Texas freeze in February as well as the completion of pipeline maintenance work in the Northeast. Yet, EBW added that power demand in Texas and neighboring states has lagged the production recovery. Several refineries have yet to resume full operations, resulting in looser supply/demand balances and hampering prices.

All of that, coupled with a waning need for heating fuel in March, was reflected in the latest U.S. Energy Information Administration storage report. EIA on Thursday reported a withdrawal of 52 Bcf from natural gas storage for the week ended March 5. It missed expectations set by analysts — polls showed median estimates in the 70s Bcf — ahead of the report.

Stocks ended the period at 1,793 Bcf, compared with the year-earlier level of 2,050 Bcf and the five-year average of 1,934 Bcf, according to EIA.

Rising Concern

For two consecutive weeks, the EIA print was widely viewed as bearish. The agency posted a 98 Bcf draw from storage in the week ended Feb. 26, far from the 130s-140s Bcf pull that polls foreshadowed. Analysts now expect a paltry withdrawal with the next government storage release.

Analysts at Tudor, Pickering, Holt & Co. (TPH) said “concern is on the rise” after the latest report. “We think the culprit is demand and a slow return of both industrial and power demand in the wake of the storm. The data also lends credence to this, with weakness centering around the South Central region, which delivered a 15 Bcf build.”

Additionally, looking ahead to the next EIA report, TPH estimated a 6 Bcf/d week/week drop in residential/commercial demand on warmer weather.

“If industrial demand returned to normalized levels, we’d expect a low-20s Bcf draw,” the TPH team said. “However, given several large refineries remain offline, it’s possible the missing demand remains sidelined one more week, which would put the draw closer to zero.”

Wood Mackenzie analyst Robert Bickhart said that, in the past week, many Gulf Coast refineries “remained fully shut,” while others had only partially restarted. “A full return to pre-outage demand levels could take weeks more, especially as several of the larger facilities have reported widespread damage” from the Texas storm last month, he said Friday.

Meanwhile, after he signed a $1.9 trillion coronavirus relief bill, President Biden on Thursday night implored states to expand vaccine eligibility to all American adults by May 1. He said supplies would support a broader inoculation effort that would make it possible for people to safely gather on the July 4 holiday, signaling the beginning of an end to the pandemic.

“There’s a good chance you, your families and friends will be able to get together in your backyard or in your neighborhood and have a cookout or a barbecue and celebrate Independence Day,” Biden said during a televised speech from the White House.

The virus relief legislation includes funding for $1,400 direct payments to a majority of Americans as well as an extension of a $300 weekly unemployment supplement. It also funds vaccine distribution programs and provides support to state and local governments as well as school districts.

Cash Prices

With a near-term weather catalyst, spot gas prices gained ground Friday.

Warm temperatures permeated most of the Lower 48 on Friday, with highs ranging from the 40s to the 60s in northern states and from the 70s to 80s across the South, National Weather Service (NWS) data showed.

But NWS forecasts called for a late-winter blast with cold rains and shots of snow across the Rocky Mountain Region and parts of the Plains over the weekend. Chilly air and lows in the teens and 20s were also predicted to blow into the Great Lakes and Northeast regions during the weekend.

Against that backdrop, prices in the volatile Northeast jumped, leading the national average higher.

Algonquin Citygate spiked $1.790 day/day to $4.100, and Tenn Zone 6 200L soared $2.410 to $4.840.

Elsewhere, prices were mixed. In the Midcontinent, Enable East picked up 2.5 cents to $2.350, while OGT shed 20.0 cents to $2.200.

Out West, where temperatures were mild heading into the weekend, SoCal Citygate lost 17.0 cents to $3.355 and SoCal Border Avg. dropped 17.5 cents to $2.665.

Comfortable temperatures are expected to spread across much of the country in the week ahead.

Bespoke Weather Services Friday that weather models showed temperatures leaning slightly warmer than normal overall for the next two weeks.

“There are indications of a weak cooler trough swinging in the eastern U.S. toward days 14-15, though we do not expect this to be a significant player in the pattern, and any cooling is expected to be short-lived, with the bias of the pattern staying to the warmer side as we end March and move into the month of April,” Bespoke said.