As natural gas futures traders continued weighing coronavirus demand destruction against future production cuts, the bearish side of the argument won out Tuesday, at least for the near term. The April Nymex contract tumbled 8.6 cents to settle at $1.729/MMBtu.

In the spot market, a few hubs gained in the western United States, but mild temperatures for much of the country saw prices generally ease lower; NGI’s Spot Gas National Avg. dropped 2.0 cents to $1.645.

Bespoke Weather Services observed a “divergence” in price action Tuesday between contracts near the front of the curve and those further out in late 2020 into early 2021. The firm pointed to two factors at play.

“One, we are anticipating a considerable amount of demand destruction due to the slowing down of the economy, although the exact extent cannot yet be determined. This is pressuring the front of the curve,” Bespoke said. “On the flipside, the very low price of oil means that we may see less associated gas due to production cuts later this year, which is why the later-dated contracts were supported today.

“This leads to a curve structure that is definitely bullish in the event of a near-term catalyst, although the reasons for this structure are pretty clear.”

As for the latest weather guidance, Bespoke said the outlook remained mostly unchanged after Tuesday’s midday model runs, putting the forecast “not far from normal” and thus “not a factor that moves the needle significantly.”

Energy Aspects recently updated its end-March storage carryout projection to 1.99 Tcf, with near-term fundamentals remaining relatively steady over the past week despite the volatility in markets.

“The present set of fundamentals does not currently support” the $1.90/MMBtu-plus pricing that was observed last week, Energy Aspects said. “There are risks to lower demand stemming from even greater congestion issues” in the global liquefied natural gas market, as well as “uncertainties linked to the spread of Covid-19 and its impact on demand.

“In addition, impacts to domestic demand including industrial demand and the power sector cannot be ruled out…To be fair, weaker crude prices, if sustained, would have a real bearing on associated production volumes, but that move would really begin to take hold later in 2020 and then in 2021.”

While the market looks ahead to try to predict the impacts from the coronavirus, a look back at February illustrates the lack of heating demand experienced this winter. Citing data from the National Oceanic and Atmospheric Administration, Genscape Inc. said average U.S. temperatures for the month of February ranked it as the 30th warmest since 1895.

“Though far from record breaking, it supplements the remarkably warm months already registered this winter to collectively rank this winter as the 11th warmest in recorded history,” Genscape senior natural gas analyst Rick Margolin said. “Due to this February coming in notably warmer than normal, we saw Lower 48 demand average 101 Bcf/d. That marked about a 3 Bcf/d drop from February 2019.

“However, due to low gas prices supporting coal-to-gas switching in the power sector and ongoing structural growth” in residential/commercial demand, “this February 2020’s number registered as 6 Bcf/d greater than the prior five-year average.”

The structural growth and the price-driven increases in the power sector have served to offset the total demand impact of winter-to-date temperatures that have skewed “heavily to the warm side,” Margolin said.

From November through February, Lower 48 demand averaged 98.8 Bcf/d, down about 0.4 Bcf/d winter/winter but up more than 7 Bcf/d versus the prior five-year average, according to Genscape’s estimates.

Spot prices continued to grind lower throughout the eastern two-thirds of the Lower 48, with much of the country experiencing warmer-than-normal temperatures. Henry Hub slid 3.0 cents to $1.815.

Lower 48 demand totaled 86.7 Bcf/d for Tuesday, according to a Genscape estimate. Near-term forecasts as of Tuesday had the firm modeling a decline in demand down to 80 Bcf/d by Thursday, with demand expected to then rise to as high as 96 Bcf/d by Sunday on colder weather moving into the Midwest. Genscape estimated that demand would remain above 90 Bcf/d into early next week.

Looking at the supply side of the market, Genscape’s estimate for Lower 48 production has held steady at an average 93.4 Bcf/d over the past week.

“Imports from Canada returned above the 4 Bcf/d level on Sunday after having spent the previous eight days below that mark, averaging 3.6 Bcf/d on strong, weather-driven demand in Western Canada holding volumes back,” the firm said.

Midwest prices followed Henry lower, with Chicago Citygate trimming 3.0 cents to $1.645. In the Northeast, a few hubs dropped by double digits day/day. Algonquin Citygate fell 10.5 cents to $1.585.

Price adjustments were more mixed for Western U.S. hubs amid cooler temperatures moving through the region.

“An anomalously strong upper-level low is forecast to sit over California through midweek, while upper-level disturbances move eastward over the Four Corners late Wednesday,” the National Weather Service said. “…Temperature-wise, the upper low will help force temperatures to fall to 10-20 degrees below normal across California into the Central Great Basin and Southwest. By Thursday, a cold front will usher in much colder temperatures to the High Plains.

“While the West trends colder, eastern and southern regions will bask in May-like temperatures the second half of the week.”

In the Rockies, Kern River added 7.0 cents to $1.960, while in California, SoCal Border Avg. picked up 4.0 cents to $2.005.

Southern California Gas (SoCalGas) has been withdrawing from the restricted Aliso Canyon storage facility amid a stretch of colder temperatures and elevated demand in the region, according to Genscape analyst Joe Bernardi.

Aliso withdrawals averaged 495 MMcf/d between this past Thursday and Sunday, totaling just under 2 Bcf during that span, the analyst said.

“Demand during this time has been elevated compared to recent weeks but is lower than previous Aliso-withdrawal periods this winter,” Bernardi said. “Across these four days from March 12-15, SoCalGas demand averaged 2.92 Bcf/d. For comparison, demand has come in at 3.21 Bcf/d on all other days this winter with an Aliso withdrawal, and at 3.42 Bcf/d when the Aliso withdrawal was at least 350 MMcf/d, an amount just below the smallest daily withdrawal within this most recent period.”

The utility’s storage inventories, recently measured at 52 Bcf, sit at “by far their largest mark for this date within the past four years” and have hovered above the three-year maximum for nearly a month, according to the analyst.

“More withdrawals are likely on the way this week,” Bernardi said. “Genscape meteorologists are forecasting a sustained patch of unseasonably cold weather for Southern California over the next 10 days.” The coldest temperatures were expected for Tuesday and Wednesday, “with the weather warming up slightly by the end of this week.”