Amid signs of supply weakness, natural gas futures extended their recent gains in early trading Friday. Coming off a 10.5 cent rally a day earlier, the April Nymex contract was up another 9.0 cents to $4.721/MMbtu at around 8:55 a.m. ET.
Updated data indicating a day/day drop in domestic production was the likely source of upward pressure for natural gas prices in early trading, according to Bespoke Weather Services.
“We continue to be surprised by the lack of gains, though today’s decline could be aided by the cold plunge into the Rockies and Texas, enough to lead to some minor freeze-offs,” Bespoke said. “This will be brief, if so, but confidence is lower, given that there simply has not been much recovery thus far.”
In terms of the weather forecast, Bespoke characterized the latest outlook as largely unchanged overall.
“The forecast as a whole” in the latest model runs was “easily warmer than normal, in stark contrast to the forecasts we saw for the middle of the month just over a week ago,” the firm said.
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 124 Bcf withdrawal from U.S. natural gas stocks during the week ended March 4. The print left stockpiles at 1,519 Bcf as of March 4, and it widened the year-on-five-year-average deficit to 290 Bcf (minus 16.0%).
“Heating degree days came in a few degrees above seasonal norms, pushing gas from storage about 39% higher than the five-year average,” Enverus analyst Krishna Sapkota said in a note to clients on the latest EIA print. After normalizing for weather the print “signals tightening trends in the gas markets.”
Analysts at Tudor, Pickering, Holt & Co. (TPH) similarly viewed the market as undersupplied during the EIA report week, estimating a 3.4 Bcf/d weather-adjusted undersupply, versus an undersupply of 0.4 Bcf/d in the prior week.
As for conditions during the current week, “demand has been volatile…with both residential/commercial and power generation reversing early week deficits to the five-year average,” the TPH analysts said.
Late-week, residential/commercial demand rebounded to 39 Bcf/d, “comfortably 8.4 Bcf/d above norms, while power generation remains robust in the 28.4 Bcf/d range,” according to the firm.
TPH estimates indicate supply has been “similarly volatile,” as output from both the Midcontinent and the Permian Basin “trended lower through the week.”
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