Another warmer-than-usual winter has led Barclays to reduce its 2017 natural gas price forecast to $3.02/MMBtu from $3.38. The 2Q2017 forecast was slashed to $2.78 from $3.25.

With the second warmest winter on record, 9% warmer than expected, gas demand didn’t materialize, said analyst Nicholas Potter. Barclays’ bullish gas price expectations for 2017 have been pushed into next year.

“There is an upside scenario for 2017 gas prices, but fundamentals alone will not get us there,” he said in a note on Thursday. “Instead, a bull run would depend largely on a hot summer, which is outside anyone but Mother Nature’s control.”

Barclays updated price is nearly equal to a revised forecast by the Energy Information Administration earlier this month, which reduced its spot price to $3.03/MMBtu, 12% lower than the February outlook.

Before the 2016-2017 winter season began, Barclays analysts had seen the potential for a bullish gas story lasting as long as 18 months. However, the lack of cold weather has brought the market “dangerously close to the production increase that will likely arrive by the second half of 2018 as Northeast pipelines come online and associated gas production ramps up.” Barclays is expecting U.S. gas production to increase 5.2 Bcf/d year/year (y/y) in 2018.

In the past two years, using 10-year “normal” weather scenarios, Barclays overestimated residential-commercial (res-com) demand levels by about 1,220 Bcf, or 5% of total annual U.S. gas demand.

“Needless to say, these overestimations have led to higher price expectations than have actually been realized,” Potter said.

Res-com demand for the winter of 2016-2017 now is expected to average around 34 Bcf/d, a 1.9 Bcf/d improvement from the winter of 2015-2016, but down by about 3 Bcf/d from the 2010-2015 five-year average. Inventory levels at the end of March now are expected to be around 2 Tcf, 10% above the five-year average.

Although storage inventories will be ahead of the five-year average, “they will still be 23% below last year’s levels,” Potter said. “This should help prevent the severe shoulder season weakness seen last year (prices sub $2.00/MMBtu) and generally higher prices y/y.”

The importance of colder versus warmer winters to gas prices cannot be overstated, he said.

“The difference between an 11% colder-than-normal winter (polar vortex) and a 9% warmer-than-normal winter (this year) is 1,118 Bcf, or 7.4 Bcf/d, of November-March demand,” he said. “That is the difference between storage ending March at 2 Tcf, which appears likely this year, or at 880 Bcf in a cold winter.”

Continued price weakness is expected into the second quarter as the market focuses on the high storage inventories. This week’s snowstorm Stella offered support as frigid temperatures in high demand areas helped to boost cash prices. However, as the cold subsides and the market becomes fixated on high storage levels, there likely will be price weakness heading into shoulder season.

Barclays is forecasting 2Q2017 demand to refill storage of about 7.8 Bcf/d, below the five-year average of 10.1 Bcf/d.

“Lower demand to refill storage in 2Q2017 would result in coal-to-gas switching to balance the market. With little in the form of seasonal demand (shoulder season), we anticipate that the market would have to find balance by lowering prices enough to encourage more coal-to-gas switching.”

The 2Q2017 price forecast of $2.78/MMBtu should result in another 2 Bcf/d of power burn from coal-to-gas switching.

“We think that prices should find a firm floor at $2.50/MMBtu in 2Q2017,” Potter said. “Prices below this level would result in a large incremental step-change higher in coal-to-gas switching, which would not be necessary to balance the market.”

The third quarter will set the tone for the 2017-2018 market, according to Barclays.

“With winter mostly behind us, the next period in which weather uncertainty could cause swings in pricing will be June-September as power burn demand kicks in,” Potter said. Assuming normal summer temperatures, prices this summer are forecast at $3.05/MMBtu, down from a previous expectation of $3.55.