Aided by moderate screen weakness the prior day, cash point averages on Thursday for Friday delivery came off a couple of pennies at a majority of locations with one point apiece in the Northeast, Texas, Rockies and the West shedding a dime while Dawn in the Midwest dropped 20 cents.
Following two consecutive days of mostly moving higher, the market took the edge off a bit with Thursday’s declines and could continue lower on Friday thanks to a bearish natural gas storage report. The Energy Information Administration (EIA) reported Thursday morning that 83 Bcf was injected for the week ending April 30. Going into the report most industry estimates were for a build of between 70 Bcf and 80 Bcf. Natural gas futures traders took the bearish news and ran with it as the June contract recorded a $3.855 low on Thursday before closing the regular session at $3.929, down 6.2 cents from Wednesday’s finish and just more than a dime away from the downtrend’s April 1 front-month low of $3.810.
Some analysts believe the bearish storage situation has probably built a near-term ceiling for natural gas prices.
“Prices have remained range-bound over the week following last week’s bearish storage activity,” said Teri Viswanath, an analyst with Credit Suisse. “We believe the larger-than-expected storage injection should create a price ceiling for the remainder of the week.”
Crude’s price free-fall isn’t helping natural gas bulls either. June crude, which lost another $2.86 on Thursday, has dropped $9.08, or 11%, to $77.11/bbl since Monday’s close.
While most natural gas cash points shed in the neighborhood of a nickel on Thursday, some spots dropped a dime or more. In the Gulf region, the Henry Hub stayed above the screen for a second straight session. The hub average Thursday dropped 2 cents to $3.97.
Out West, points dropped anywhere from a penny to 10 cents, but most declines in the region were right around 6-7 cents or less.
“We are starting to see some warmer temps on the West Coast, but during the shoulder season we’ve got some cool stretches still mixed in,” said a western utility buyer. “That said, I think we’re starting to see the last bit of winter-spring weather. I think the mixed temps explain a lot of the back and forth in gas prices.”
As for Thursday, the utility trader said prices on the West Coast for the most part held up while the basis dropped off a little bit. “Things were a little bit down from Wednesday, but a lot of that probably had to do with the large storage injection,” he told NGI. “People were expecting a slightly smaller injection, so when we got the 83 Bcf injection I think the cash market traded off of it a bit.”
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