Natural gas futures fell for a second consecutive day on Wednesday, as traders absorbed dwindling expectations for strong weather-driven demand, moderating U.S. liquefied natural gas (LNG) levels and a change in control in the nation’s capital.

Evening Markets

The February Nymex gas futures contract shed seven-tenths of a cent day/day and settled at $2.539/MMBtu. Prices recovered late in the session after trading down several cents most of the session. A day earlier, the prompt month plunged 19.1 cents.

March eked out a gain of four-tenths of a cent and settled at $2.533 on Wednesday. However, earlier in the session, the March/April spread traded to a three-week low, a bearish indicator of expectations for the remainder of the winter season, said Mizuho Securities USA’s Robert Yawger, director of Energy Futures.

“Incredibly, the last month of the winter strip is trading well below the first month of the summer strip,” he said. “That is not a healthy situation.”

NGI’s Spot Gas National Avg. also posted a second-straight drop, falling 14.0 cents to $2.550 after giving back 15.5 cents a day earlier.

The domestic and European weather models at midday Tuesday both showed “decent demand” beginning Saturday and extending through most of the following week “as cold shots impact the western, northern and eastern” United States, NatGasWeather said.

However, the firm said, temperatures ahead of the weekend are expected to be generally warm for this time of year. What’s more, the looming blast of winter air is not as cold or as widespread as the forecast “showed last week when it advertised stronger pushes of frigid Arctic air” over Western Canada descending into the Midwest and pushing both to the South and Northeast for prolonged bouts of freezing temperatures.

For some time, forecasters expected the cold would carry well into February. Now, NatGasWeather said, the first several days of next month are forecast “to be much warmer than normal over most of the country with very little subfreezing air anywhere — for a return to light national demand and for a solidly bearish back-weighted 15-day forecast.”

EBW Analytics Group said the outlook suggests the peak of what is typically the strongest season for natural gas could pass without any sustained surges in demand.

“With the heart of winter drawing to a close,” EBW said, “this cool-but-not-frigid weather is not enough to satisfy the market.”

LNG feed gas volumes have been strong all winter, lifted notably by northern Asia demand amid unusually intense cold and supply shortages. However, the coldest of the deep freeze in Asia is forecast to pass this month, easing heating needs and potentially affecting demand for U.S. LNG.

LNG volumes held above 11 Bcf and near record levels over several days this month, NGI data show. Still, export levels dipped to 10.7 Bcf on Tuesday and down further to 10.4 Bcf on Wednesday.

The markets may look to the U.S. Energy Information Administration’s (EIA) storage report to assess supply/demand dynamics through mid-January. Because of the Martin Luther King Jr. federal holiday on Monday and Inauguration Day on Wednesday, EIA is to release its report on Friday, a day later than usual.

Early estimates point to a relatively steep pull. Results of a Bloomberg survey showed estimates ranging from withdrawals of 158 Bcf to 188 Bcf, with a median forecast for a 169 Bcf decrease.

EIA previously reported a withdrawal of 134 Bcf from natural gas storage for the week ended Jan. 8. That compared with a 91 Bcf reduction in stockpiles during the comparable period a year earlier and with a five-year average withdrawal of 161 Bcf, according to the agency.

Market participants could also pay close attention to news coming out of the newly minted President Biden’s administration, which took the reins of the White House from President Trump at noon on Wednesday.

Biden campaigned on promises to put the United States on a path to a carbon-free power sector by 2035 and a carbon-neutral economy by 2050, vows that could hamper the fossil fuels sector.

Even before Biden officially took office, Canadian leaders this week vowed to rescue TC Energy Corp.’s Keystone XL (KXL) from a Biden plan to cancel the U.S. presidential permit for the $8 billion oil export pipeline project. TC on Wednesday halted work on KXL pending a review of Biden’s anticipated decision.

The company said it “will review the decision, assess its implications, and consider its options.”

The federal energy policy pendulum appears poised to swing swiftly back toward hands-on climate policy almost immediately, according to analysts at ClearView Energy Partners LLC. “Biden aides have widely telegraphed his intent to unleash a fusillade of executive actions.”

In the run-up to his inauguration, meanwhile, Biden put a heavy emphasis on combating the coronavirus, saying he would set aggressive vaccination goals in an effort to bring the pandemic to an end this year and fully reopen the U.S. economy.

If successful, economists said, it could open the door for strong economic growth in the second half of 2021 and overall expansion this year. That would mark a reversal from the contraction recorded last year. Jefferies Equity Research chief economist Aneta Markowska, for one, is looking for 2021 U.S. gross domestic product growth of 6.4%.

Spot Prices Sputter

Next-day cash prices dropped as temperatures proved benign across most regions and relatively lofty in some corners of the country that are usually reliable generators of strong heating demand in January. Temperatures in the northern Plains, for example, approached 50 degrees on Wednesday.

While parts of the Northeast and Great Lakes were expected to see chilly temperatures, National Weather Service forecasts pointed to mostly mild temperatures again Thursday and light overall heating demand.

Price declines were most pronounced in the volatile Northeast, where Tenn Zone 6 200L dropped $1.095 day/day to average $3.065, while Algonquin Citygate shed $1.260 to $3.035.

Wood Mackenzie noted that Algonquin Gas Transmission on Tuesday declared a force majeure due to an unplanned outage on its G System Line G-1 V/S 7 in Massachusetts. “While efforts to restore the line to full capacity were underway, the estimated time of restoration is unclear,” Wood Mackenzie said Wednesday. Capacity on the G System was reduced to around 402 MMcf/d for Wednesday’s gas day.

Based on historical nominations and expected milder weather across New England, however, “limited impact to flow is expected at this time. Over the past seven days, flows on the G System have averaged 313 MMcf/d, approximately 89 MMcf/d less than current operational capacity limitations,” Wood Mackenzie said.

Elsewhere, prices dropped across much of the East. Dominion Energy Cove Point fell 19.0 cents to $2.530 and Columbia Gas declined 12.0 cents to $2.245.

Out West, SoCal Citygate lost 34.0 cents to $2.925 and Malin fell 10.0 cents to $2.445.