After a three-day run, natural gas futures screeched to a halt Thursday after the latest round of storage data showed inventories grew more than expected. On the first day in the prompt position, the June Nymex futures contract settled at $2.911/MMBtu, off 4.9 cents day/day. July fell 5.0 cents to 2.961.
Spot gas prices also retreated across most of the country. NGI’s Spot Gas National Avg. dropped 9.5 cents to $2.680.
The mild weather pattern on tap for the next couple of weeks has done little to aid in the recent price rally along the Nymex curve. However, traders looking to the latest storage data for justification of the rise in prices — or for a reason to pull back — were not disappointed.
The Energy Information Administration (EIA) said Thursday inventories during the week ending April 23 rose by 15 Bcf, larger than what the market had been expecting. Ahead of the report, major surveys had clustered around a high single-digit build, though injection estimates were as high as 28 Bcf.
The 15 Bcf build was much smaller than historical figures, expanding the deficit to the year-ago level and flipping the surplus to the five-year average to a deficit. However, traders were not impressed and immediately sent prices lower.
Huntsville Utilities’ Donnie Sharp, natural gas supply manager, questioned whether the larger-than-expected build would “knock some of the air out” of what he said was an “overbought market” approaching summer.
Sharp and other participants on The Desk’s online energy chat Enelyst noted the higher-than-expected build in the South Central region. EIA said South Central inventories rose by 6 Bcf, including a 2 Bcf injection into salt stocks and 4 Bcf into nonsalts. Most analysts had pegged the build at 1-2 Bcf.
Another surprise in the latest EIA data was the 6 Bcf withdrawal in the East.
“It was much colder than normal over the interior U.S., slightly cool over the East, while warm over the West Coast,” NatGasWeather said of temperatures in the EIA report reference period.
Elsewhere, Pacific inventories rose by 7 Bcf, while Midwest stocks increased by 6 Bcf, according to EIA. The Mountain region reported a 1 Bcf increase in stocks.
Total working gas in storage as of April 23 was 1,898 Bcf, 302 Bcf below year-ago levels and 40 Bcf below the five-year average, EIA said.
Bespoke Weather Services chief analyst Brian Lovern said the EIA figure was “just close enough to call ‘neutral’” given the quick retreat in prices after the report. This likely takes the risk of $3.00 gas out of play for a while, he said, barring a more consistent decline in production or stronger power burns on a weather-adjusted basis.
Production was seen a little higher day/day, but liquefied natural gas (LNG) feed gas volumes also recovered from Wednesday’s dip. NGI data showed flows to U.S. terminals jumping back to 11.3 Bcf after slipping to around 10.7 Bcf.
Meanwhile, NatGasWeather said the latest weather data gained some demand for the 15-day period. This is because of colder weather forecast for the middle of next week into the following week as late-season weather systems and associated cool shots sweep across the northern and central United States. However, added demand through colder trends this late in the heating season are not expected to translate to nearly as much demand compared to earlier in the year, according to NatGasWeather.
“In addition, we believe the natural gas markets would prefer hotter trends over colder trends, as this would suggest summer heat will arrive early instead of late.”
Nevertheless, The Schork Group pointed out that technical indicators remain firmly in bulls’ favor. As far as this month goes for June gas, a drop below $2.839 alerts to weakness toward the firm’s $2.702 second support point. Below that, support is expected at $2.571. Strength above $3.135, meanwhile, opens the door to $3.294 and then firm resistance at $3.462.
Spot gas prices also moved lower amid a mostly mild weather pattern expected over most of the country.
Forecasts showed wet weather systems impacting a large stretch from Texas to the Ohio Valley on Thursday with slightly cool daytime temperatures in the 50s to 70s. Most of the rest of the United States was expected to be comfortable as well, according to NatGasWeather, though some cooler weather was on track to hit the Great Lakes and Northeast beginning Friday. Despite the “minor bump” in projected demand in that region, most other regions were forecast to remain “comfortable.”
Prices fell hardest in the West, where Malin dropped 19.0 cents day/day to average $2.750 for Friday’s gas day. Ruby-Receipts tumbled 23.5 cents to $2.660, while Kern Delivery slid 13.0 cents to $2.935.
Over in the Midcontinent, Enable East spot gas fell 17.0 cents to $2.585, and in South Louisiana, Henry Hub slipped 8.5 cents to $2.845.
Most Northeast locations came off about a nickel or so day/day.
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