Natural gas futures got hammered early, but came roaring back Monday in another “chaotic” session. The May Nymex contract, which expires Tuesday, plunged to an intraday $1.593 low and then bounced back, settling the day at $1.819, up 7.3 cents from Friday’s close. June picked up 2.1 cents to close at $1.916.

Spot gas prices were mostly lower amid a break between weak cool shots moving from the U.S. Midwest to the East. NGI’s Spot Gas National Avg. slipped 3.5 cents to $1.550.

After logging more than a week of 10-cent-plus trading ranges, Monday’s erratic swings in the futures market were not unexpected, especially given May’s looming contract expiration. Bespoke Weather Services said more “chaotic” moves for the prompt month could occur prior to rolling off the board, with more risk on the downside versus upside. The firm noted, however, that the market is thinner, meaning it can be more easily “pushed around.

“There are definitely conflicting views on what happens from here, and to be fair, it is a tricky situation,” Bespoke said.

The data, however, still suggests that it is difficult to be bullish at the front of the curve until there are clearer signs that the economy is returning, and balances will tighten significantly, according to Bespoke.

“Winter can remain supported, as that is where the lower production story can take precedence,” Bespoke said. “Is it possible that cuts in production come sooner? Absolutely, and if that happens, the story at the front of the curve can change, but we do not see that yet.”

However, Criterion Research LLC energy market analyst James Bevan said that since April 19, natural gas production has dropped a total of 1.4 Bcf/d, to Monday’s top-day estimate of 89.5 Bcf/d.

“Before this, we merely flirted with early-cycle drops, only to have them wiped away by the evening shift. Now, it seems to be real,” Bevan said on The Desk’s online energy platform

Criterion has seen a “sustained reduction” in supply from the Rockies and the South Central regions, with Northeast production holding stable. In the Rockies, the firm attributes the natural gas declines to the crude oil pricing environment, along with an operational flow order issued on Northern Border Pipeline Co. last week.

However, demand also is on the decline across several sectors, according to analytics firm Enverus. Residential/commercial, industrial and power demand saw week/week decreases of 4.61 Bcf/d, 0.65 Bcf/d and 0.17 Bcf/d, respectively. The firm also saw liquefied natural gas (LNG) export demand fall 0.51 Bcf/d due to decreases at the Corpus Christi, Sabine Pass and Freeport terminals, while exports to Mexico increased 0.28 Bcf/d.

The potential for significant U.S. LNG shut-ins remains a meaningful risk to the market this summer, since feed gas for the country’s liquefaction terminals makes up about 10% of total demand. Reports surfaced last week that more than 20 LNG cargoes have been canceled for June, which equates to roughly 3.5 Bcf/d of demand, according to Tudor, Pickering, Holt & Co (TPH). “This could push total U.S. feed gas demand to around 5 Bcf/d, from peaks of 9.5 Bcf/d at the end of March.”

The TPH team said the steep decline in projected LNG demand means production declines would need to accelerate through May to offset the losses. “With most volumes sold on month-ahead contracts, we’re expecting meaningful volumes to come off the market when the calendar flips over. We estimate 6-7 Bcf/d of total gas shut-ins, dropping total U.S. production towards 87-88 Bcf/d, from a March average of 94 Bcf/d (current 93 Bcf/d).”

If shut-ins accelerate, TPH analysts could see pricing nudge back above $2.00 in the near term, but see limited upside to the summer strip from there, with committed U.S. LNG exports already out of the money by around 50 cents and expected to drive utilization towards 50% in the third quarter, from 90% last week.

NGI’s U.S. LNG Export Tracker shows feed gas deliveries dropping to around 7.154 Dth for Monday, down about 0.5 Dth from Friday.

Given all the moving parts, it’s no wonder “gas prices are struggling to find traction to get above $2.00,” Enverus said.

However, storage contracts are showing significant value for this time of year compared to recent years, according to the firm. A key way to determine the value of owning a storage option is to look at the October-to-January price spread, or the spread from the end of injection season to the peak of winter demand, Enverus explained.

“A wider October-to-January spread indicates fear in the market that storage will fill to capacity, making storage option ownership more valuable.”

That fear has been evident, with the October-to-January spread sitting Monday at 67.9 cents after reaching as high as 74.2 earlier in April, according to Enverus. The last time this level of spread was seen this early in the year, the firm said, was 2012-2013, when the spread was 76.2 cents; in comparison, in 2016-2017 it fell slightly lower at 66.5 cents. The five-year average of the spread at this time of year is around 38 cents.

“While this wide spread incentivizes traders to put gas into storage and capture the large spread later during the winter, natural gas demand will still need to be met this summer,” Enverus said. “As producers shut in wells because of poor oil economics, natural gas production will also decline, meaning less gas available for injection over the summer.”

As of April 17, total working gas in storage stood at 2,140 Bcf, 827 Bcf above last year at this time and 364 Bcf above the five-year average, according to the Energy Information Administration. With demand still pressured by the economy, Enerverus expects storage inventories to reach average to above average levels by the end of injection season. “However, these inventories aren’t expected to be enough to overcome the supply drop, and natural gas prices will need to increase to incentivize production.”

With “near-ideal” temperatures in much of the Lower 48 sparking light to moderate demand, spot gas prices softened Monday. Losses of 10-20 cents were the norm, while smaller declines were seen out East, where some cooler weather is lingering.

NatGasWeather reported that a weather system was tracking through the East on Monday, resulting in “light heating needs” for the region. After a break Tuesday, another weather system was forecast to track across the Great Lakes and East Wednesday-Friday with showers and “modest cooling,” according to the forecaster.

Algonquin Citygate next-day gas slipped 4.5 cents to $1.775, while Columbia Gas in Appalachia was down 5.0 cents to $1.595.

Benchmark Henry Hub cash tumbled 12.5 cents to $1.645, with similar decreases seen across Texas.

The exception in the Lone Star State were markets in the Permian Basin, where Waha next-day gas, one week after plunging to a record low of minus $10.000, jumped 35.0 cents to $1.035 as temperatures were on the rise. NatGasWeather said daytime temperatures could reach the 90s and 100s in West Texas this week.

Hot weather also was in store for the Southwest, and with ongoing maintenance on El Paso Natural Gas, spot gas prices at El Paso S. Mainline/N. Baja shot up 30.5 cents to $1.430.

Prices in the Rockies were mixed but mostly higher. However, Cheyenne Hub was down 9.0 cents on the day to $1.385 amid some restricted flows out of the region. Events on Wyoming Interstate Co. (WIC), Colorado Interstate Gas, Trailblazer Pipeline and Tallgrass Interstate Gas Transmission are expected to reduce flows out of the hub by around 300 MMcf/d beginning Tuesday and continuing through the first week of May, according to Genscape Inc.

“These flow reductions however, represent a small fraction of gas flowing in and out of Cheyenne Hub,” Genscape analyst Matthew McDowell said.

During the last 30 days, a sample of pipeline interconnects has shown an increase in gross nominations from around 2.4 Bcf/d to around 2.8 Bcf/d, nearly a 400 MMcf/d increase, according to McDowell.

Meanwhile, Segment 420 maintenance on Wyoming Interstate (WIC) has the potential to bottleneck 275 MMcf/d of flow to Opal hub Tuesday and Wednesday, according to Genscape. WIC is conducting compressor maintenance at its Wamsutter compressor station in Sweetwater County, WY, and flows through the segment could be backed up at interconnects with Dominion Energy’s Overthrust Pipeline, McDowell said.

“Segment 420 is part of a bypass of two receipt heavy laterals in the Piceance and Uinta basins that helps move molecules from East of the Rockies to Opal,” McDowell said.

In past events, the analyst said that nominations at WIC’s Threemile Meter Station that have shown a day/day drop to 0 MMcf/d were eventually revised to around 50 MMcf/d in later cycles. The counterpart to this interconnect, Overthrust’s WIC Wamsutter (REC) point, has mirrored the interconnect’s nominations, according to McDowell.

“Of the interstate pipes heading West from Opal, Ruby has historically responded with decreases in flow through its Roberson Creek Compressor station in Lincoln County, WY. This could put upward pressure on Malin Hub, but it’s important to note that WIC states that 141 MMcf of capacity will be available for the last cycle of gas day Wednesday (April 29),” McDowell said.

Malin next-day gas fell 5.0 cents to $1.485, a similar decline to northern California markets.