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‘Bullish’ EIA Data Boosts Natural Gas Futures Prices
- Lower-than-expected storage figure reflects chilly April weather
- Strong export demand also tightening up balances
- Current trajectory points to ‘dangerously low’ storage heading into next winter
Natural gas futures prices strengthened Thursday after the latest government storage data pointed to continued tightness in the market. The May Nymex contract settled at $2.749, up 5.7 cents from Wednesday’s close. June climbed 5.5 cents to $2.831.
Spot gas prices were mixed, but fell off sharply on the East Coast as the coldest temperatures associated with recent weather systems may be in the rearview mirror. NGI’s Spot Gas National Avg. finished 11.0 cents lower at $2.580.
Even as weather models came into better agreement that the early May time frame would be generally mild across the country, Nymex futures were quick to pounce on the latest storage data.
The Energy Information Administration (EIA) reported a smaller-than-expected 38 Bcf injection into natural gas storage facilities for the week ending April 16. Ahead of the report, estimates ranged from 39 Bcf to 56 Bcf.
The EIA’s 38 Bcf injection compares with last year’s 68 Bcf build and the 26 Bcf five-year average.
Gelber & Associates Inc. senior market analyst Dan Myers, whose storage projection was close at 39 Bcf, attributed the smaller build to chilly April weather, strong exports and some tightness that may have been masked in the prior EIA report because of the Easter holiday.
Participating on The Desk’s online chat Enelyst, Myers said a 40 Bcf injection would have indicated a “neutral balance” in supply and demand. So far, signs are pointing to continued tightness in the coming months.
In addition to the hotter weather looming around the corner, strong liquefied natural gas (LNG) pricing overseas bodes well for U.S. exports. “Based on the Japan Korea Marker/National Balancing Point forwards, it’s clear sailing,” he said.
Meanwhile, exports to Mexico also have been coming in stronger, with Myers expecting around 6.5-7 Bcf/d of flows given the completion of infrastructure south of the border.
In the Lower 48, Myers said the market has benefited from additional coal-to-gas switching with prices sinking toward $2.500 earlier this month. “That trend could reverse. We’ll be watching the price action. For now, the stronger power generation is still needed to keep things tight.”
Broken down by region, the East led with a 14 Bcf injection into storage inventories, while the South Central added 12 Bcf, according to EIA. This included a 7 Bcf build into nonsalt facilities and a 5 Bcf build into salts. Midwest stocks rose by 7 Bcf, and Pacific stocks climbed 5 Bcf. The Mountain region reported no net change in inventories.
Total working gas in storage as of April 16 stood at 1,883 Bcf, 251 Bcf below year-ago levels and 12 Bcf above the five-year average, EIA said.
Outside of storage, other fundamentals were less supportive.
Bespoke Weather Services said production was again revised higher, though output essentially is where it has been for the last few months, outside of the February freeze-off event. LNG volumes were holding steady above 11 Bcf, while power burns remained weak.
Bespoke noted that its historical dataset was revised lower, “so the last several weeks do not show as much of a weakening trend relative to the time beforehand. Either way, it remains the main weakness in the data.”
That said, the $2.75 zone has been a stubborn point of resistance for a while. Bespoke expected another bullish EIA figure would test it again, but it is not as easy to suggest a pullback this time. “…It is difficult to ignore this string of EIA numbers, and what the reflected supply/demand balance implies for storage levels moving forward.
“…Extrapolating recent balances forward would keep storage dangerously low heading into next winter, but at the same time, we do expect some loosening at or above $2.75 as well, which could halt the run of bullishness, at least for now.”
Bespoke said it’s not yet bullish at this level, “but it is hard to argue for much downside risk, either. We prefer to let the dust settle and see how the data looks, and what it points to in next week’s number.”
The firm is looking for an injection well below the five-year average. This is because of the high demand seen this week amid the string of late-season winter storms. “So the key will be how it looks when adjusting for weather.”
With the chilliest weather stemming from this week’s cold snap having already occurred, spot gas prices across the country, and particularly on the East Coast, cratered.
One day after logging stout $1.00-plus gains, the Northeast posted losses of the same magnitude. Tennessee Zone 6 200L next-day gas plunged $1.705 to $2.410, and Transco Zone 6 non-NY dropped 35.5 cents to $2.205.
In Appalachia, Texas Eastern M-3, Delivery spot gas prices tumbled 29.5 cents to $2.205.
Prices also started to fall in the country’s midsection. Joliet next-day gas slid 4.0 cents day/day to $2.615, while Enable East shed 12.5 cents to $2.520.
Texas cash also was lower, particularly in the western part of the state. Oneok WesTex dropped 8.5 cents to $2.370.
West Coast markets also softened amid the generally moderate outlook in that region. PG&E Citygate cash fell 9.0 cents to $3.830.
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