• Robust U.S. exports climbed higher
  • Cash prices advanced, boosted by Midwest chill
  • But the May contract failed to find momentum

Already strong U.S. exports climbed higher Tuesday, but a weakening weather outlook and anticipation of a storage injection kept natural gas futures in check. The May Nymex contract debuted as the prompt month by falling 3.0 cents day/day to $2.623/MMBtu. June shed 2.7 cents to $2.681.

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Cash prices, in contrast, climbed on Tuesday amid a Midwest cool front that was expected to push east in coming days. NGI’s Spot Gas National Avg. gained 4.5 cents to $2.330.

The April futures contract rolled off the board Monday after settling at $2.586, down more than 20 cents month/month. While it gathered momentum over several sessions late in its run, the April contract ultimately was held back by ongoing forecasts for comfortable spring temperatures and fading heating demand.

The May contract’s opening day was hampered by similar forecasts.

The latest weather models Tuesday “maintained an exceptionally bearish pattern” for late this weekend through next week, when most of the country is expected to experience “near- to warmer-than-normal” temperatures, NatGasWeather said. “It’s getting to be too late in the year to drive strong demand for heating unless conditions are colder than normal.”

The firm noted that liquefied natural gas (LNG) demand remains a bullish factor. LNG feed gas volumes topped 11.7 Bcf on Tuesday, NGI data showed, thanks in large part to robust demand from Europe. That is near record levels and continues a long run of better than 11 Bcf/d over most of March.

In addition, the Suez Canal reopened to cargo traffic after numerous days of delays, freeing up an important delivery channel for LNG, analysts said. “The Suez blockade may have been a lasting comedy gold for the Internet, but it will soon be forgotten by the market,” Rystad Energy analyst Louise Dickson said.

However, the warm weather outlook deep into April and recent gains in Lower 48 production are hampering prices, NatGasWeather said. Lower 48 production has hung near 90 Bcf this week, up nearly 1 Bcf since the start of the prior week, the firm said.

Analysts on Tuesday were also looking ahead to Thursday’s Energy Information Administration (EIA) storage report and widely anticipating a shift from withdrawals to an injection with the latest inventory data.

Energy Aspects issued a preliminary estimate for a 14 Bcf injection for the week ended March 26. The firm estimated a nearly 20% week/week decline in heating degree days and a 5.7 Bcf/d drop in residential/commercial demand for the period. Power burns were down an estimated 1.0 Bcf/d week/week, with production up just 0.1 Bcf/d in that time.

“The steep fall in end-winter heating use is not quite offset by record LNG feed gas demand,” Energy Aspects said.

What’s more, April “will bring some shoulder-season looseness to feed gas demand in the form of increased maintenance on trains and upstream pipelines and compressors,” the firm added. “We forecast 9.7 Bcf/d of feed gas next month,” down notably from the highs of March. “The bulk of the decline comes from maintenance, which we anticipate will depress intake to liquefaction terminals by 1.4 Bcf/d below capacity.”

Energy Aspects projected 10.3 Bcf/d of feed gas demand for the 2021 injection season as a whole, 90% of capacity utilization.

For Thursday’s EIA report, NGI modeled an 18 Bcf injection. Preliminary results of a Bloomberg survey landed at a median 18 Bcf increase in stocks.

EIA recorded a 20 Bcf draw in the year-ago period, while the five-year average is a 24 Bcf pull.

Last week’s government inventory report showed a withdrawal of 36 Bcf for the week ended March 19. The draw was steeper than predictions for a pull in the low- to mid-20s. It was the first bullish result in a month.

The decrease in stocks for the March 19 week lowered inventories to 1,746Bcf, compared with the year-earlier level of 2,009 Bcf and the five-year average of 1,824 Bcf.

Spot Prices

Next-day cash prices advanced on Tuesday as a colder weather system tracked into the northern Plains. The chilly air was expected to trek into the Great Lakes, Mid-Atlantic and Northeast from Wednesday to Friday, bringing lows from the teens to the 30s.

Prices were up across the Midwest in the wake of the chill.

Defiance climbed 8.0 cents day/day to average $2.310, while Lebanon jumped 15.0 cents to $2.395 and NGPL Iowa-Illinois gained 7.0 cents to $2.375.

Spot prices were mixed farther east, though several hubs posted solid increases. Columbia Gas gained 13.5 cents to $2.025 and Iroquois Zone 2 picked up 20.5 cents to $2.535.

Out West, meanwhile, the potential for some early cooling demand provided some price support. SoCal Citygate spiked 38.5 cents to $2.990 ahead of high temperatures on Wednesday that were forecasted to approach 90 degrees.

The bump in demand could continue for a stretch this week, NatGasWeather said, but it is expected to be short lived.

“Much of the U.S. will warm above normal late this weekend besides the slightly cool West Coast and New England,” the firm said. Next week, upper high pressure “will rule most of the U.S. with widespread highs of 60s to 80s for light national demand.”

As weather warms, meanwhile, Wood Mackenzie analysts noted that pipelines will be increasingly posting notices regarding upcoming maintenance work during the shoulder season. This is likely to result in sporadic and abbreviated impacts to flows that could influence pricing at affected hubs.