• BREAKING: U.S. EIA reports net 14 Bcf injection into natural gas storage for the week ending March 26, coming in slightly below market expectations
  • May Nymex contract settled at $2.608/MMBtu on Wednesday, down 1.5 cents day/day

Robust U.S. export activity held at lofty levels, but natural gas futures fell again on Wednesday as traders mulled domestic demand weakness and the potential for a bearish government inventory report on Thursday.

EIA storage March 26

The May Nymex contract settled at $2.608/MMBtu, down 1.5 cents day/day. It declined 3.0 cents a day earlier, its first session as the prompt month. June fell 1.4 cents on Wednesday to $2.667.

NGI’s Spot Gas National Avg., however, advanced 12.0 cents to $2.450 amid a brief blast of chilly rains and cool air over the Midwest and eastern Lower 48 ahead of warmth in April.

Liquefied natural gas (LNG) levels were strong throughout March, boosted by rising European demand in addition to continued Asian imports. A harsh winter in Europe depleted stockpiles, creating a need to bolster inventories with U.S. LNG ahead of the summer cooling season. LNG feed gas volumes eclipsed 11.7 Bcf on both Tuesday and Wednesday, near record levels, according to NGI data.

But forecasters said that, as the weather heats up in April, customary spring maintenance projects would limit capacity at LNG facilities and eat into feed gas volumes. Rising temperatures also could push much of the Lower 48 into a multi-week period of comfortable weather conditions that minimize both heating and cooling needs, dampening demand for natural gas.

“We remain in a generally lower-than-normal demand regime at a time of year when demand is normally lower anyway, making for quite a weak picture on the weather side of the equation,” Bespoke Weather Services said.

Without a turn in weather, the firm said, power burns would need to strengthen the next few weeks to support a rally in futures. “Absent that, it will take another bullish” surprise from Thursday’s U.S. Energy Information Administration (EIA) storage report “to avoid moving lower in the prompt month,” Bespoke said.

Last week’s storage report showed a withdrawal of 36 Bcf for the week ended March 19. The decrease was greater than predictions found by major polls for a pull in the 20s Bcf, and it marked the first result on the optimistic side of estimates in a month.

The decrease in stocks for the March 19 week lowered inventories to 1,746Bcf, compared with the year-earlier level of 2,009 Bcf and the five-year average of 1,824 Bcf.

However, given a recent run of mostly mild weather, analysts expect Thursday’s EIA print to mark the onset of injection season, a development that would be bearish to the norms of recent history.

NGI’s estimate for the upcoming EIA report, covering the period ended March 26, is for a build of 18 Bcf. Last year, EIA recorded a 20 Bcf withdrawal for the period, while the five-year average is a pull of 24 Bcf.

A Bloomberg survey showed a median 19 Bcf injection predicted for this week’s EIA report. That was based on estimates ranging from injections of 13 Bcf up to 41 Bcf.

Reuters’ weekly poll produced the same range injection estimates, with a median increase of 20 Bcf.

Meanwhile, on the macroeconomic front, President Biden, a Democrat, on Wednesday unveiled a $2 trillion infrastructure plan to not only rehab the nation’s aging roads and bridges but also to invest in everything from climate change research to incentives for electric vehicle purchases and energy-efficient housing.

The proposal, however, faces an uphill climb in part because it includes a substantial corporate tax increase to pay for much of the new spending. The spending plan spans eight years, while $2 trillion in higher taxes could be generated over 15 years under the Biden plan.

[Want to know how much natural gas is being imported into Mexico? Check out NGI’s Mexico Natural Gas Flow Tracker.]

Brian Gardner, chief Washington policy analyst at Stifel Financial Corp., said Republicans are unlikely to support anything tied to a tax hike. He noted, however, that with Democrat control of the House and a narrow majority in the Senate, “some form of this bill is likely to pass.”

But “this will be tougher and take longer than passing the Covid-relief bill,” he added, referring to the $1.9 trillion package Biden signed into law earlier this year.

Cash Climbs

While the domestic demand outlook calls for weakness in April, spot gas prices on Wednesday benefited from a late March chill.

Prices in the Midwest and Northeast led the upward momentum.

NatGasWeather noted a “strong cold shot” sweeping across the Midwest, Mid-Atlantic and Northeast this week. Rains were ahead of the cold front while snow showers were possible behind it. With lows between the teens to 30s over much of the northern and eastern United States between Wednesday and Friday, “demand will be strong” outside of the West and South, the firm said.

On Wednesday in the central U.S., Chicago Citygate picked up 14.0 cents day/day to average 2.545, while Joliet advanced 14.0 cents to $2.530.

In Appalachia, Dominion North jumped 28.0 cents to $2.125 and Tenn Zone 4 200L spiked 42.0 cents to $2.440.

Hubs in the volatile Northeast generated the biggest gains, with Algonquin Citygate up 62.0 cents to $2.535 and Niagara ahead 46.0 cents to $2.470.

The weather-driven demand, however, is unlikely to last. High pressure “will build over much of the U.S. late this weekend through next week with highs of 60s to 80s for light demand,” NatGasWeather said. Cooler exceptions for next week “will be over the showery West Coast and far Northeast corner,” the forecaster added.

Looking to the second full week of April, the firm sees continued high pressure and mild temperatures for the vast majority of the country.

On the pipeline front, Wood Mackenzie noted that Tennessee Gas Pipeline scheduled maintenance to begin Thursday at the Iroquois Wright Receipt Meter, located in Schoharie County, New York. The work, which requires the meter to be shut in, is expected to last through April 11.

“The operational capacity of the meter is 400 MMcf/d, but there is usually available capacity at this location,” Wood Mackenzie said. “Daily flows have averaged approximately 155 MMcf/d for March and around 330 MMcf/d for February.”