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Natural Gas Futures Advance Thursday Ahead of Late Winter Blast
Natural gas futures found their footing on Thursday, ending a two-day losing streak, as traders looked past a bearish storage print and focused on late-winter heating demand, as well as the ongoing revival of a key export facility.
At A Glance:
- Heating demand lingers
- Production levels hold steady
- Freeport recovery proves uneven
The April Nymex gas futures contract gained 7.5 cents day/day and settled at $2.514/MMBtu. May advanced 8.0 cents to $2.626.
NGI’s Spot Gas National Avg. fell 11.5 cents to $2.585, though prices strengthened in several regions.
On a day with multiple potential drivers, Mother Natural reminded of her prominence in natural gas markets.
NatGasWeather said a much colder-than-normal bout of late-winter conditions was expected to sweep across the Lower 48 Saturday through Monday, delivering low temperatures near zero in northern markets and 20s and 30s as far south as Texas.
Production, meanwhile, held around 98.5 Bcf/d – down nearly 2 Bcf/d from recent highs – but analysts at East Dailey Analytics chalked this up to Freeport LNG’s restart. It is building back to full operations after being idled last year by an explosion and fire. Volumes at the liquefied natural gas export plant recently jumped by 1 Bcf/d as crews gradually work up to 2.38 Bcf/d capacity.
East Daley analysts said gas is being redirected south on Texas intrastate pipelines to Freeport LNG rather than flowing east to Louisiana. The shift from interstate to intrastate systems is key because intrastate volumes in Texas do not appear in daily pipe scrapes, creating the illusion of falling supplies.
EBW Analytics Group, meanwhile, noted that daily LNG feed gas demand approached 13.8 Bcf/d this week, reflecting Freeport’s return and bringing consumption at U.S. export facilities back near record levels.
Also in bulls’ favor: After a bearish storage result Thursday, weather-driven demand is expected to generate a steeper-than-average inventory decline with the next government print. This would mark “the arrival of a long-awaited peak in swelling storage surpluses,” EBW analyst Eli Rubin said.
Early estimates submitted to Reuters for the week ending March 17 ranged from withdrawals of 67 Bcf to 86 Bcf, with an average decrease of 80 Bcf. That compares with a pull of 55 Bcf a year earlier and a five-year average decline of 45 Bcf.
Analysts cited a barrage of winter storms impacting the Midwest and Northeast during the current week for the bullish views. The late arrival of winter follows a mostly mild 2023 to date.
“The winter that never showed up has become the season that doesn’t know when to quit,” said one participant on the online energy platform Enelyst.
Bearish Storage Data
As of Thursday, however, storage remained plump. The U.S. Energy Information Administration (EIA) reported a withdrawal of 58 Bcf for the week ended March 10. The five-year average for the period was a pull of 77 Bcf, and a year earlier, EIA posted an 86 Bcf draw.
Temperatures during the covered period were much warmer than normal over southern and eastern portions of the country, with cooler conditions reserved for the West and Northern Plains, according to NatGasWeather. This extended a trend of relatively mild winter weather in 2023 and a long list of bearish storage prints.
The latest storage decrease lowered inventories to 1,972 Bcf, leaving stocks well above both the year-earlier level of 1,451 Bcf and the five-year average of 1,594 Bcf.
Prior to the report, NGI modeled a withdrawal of 64 Bcf. Major surveys produced median draw estimates in the low 60s Bcf.
By region, the Midwest and East led with respective withdrawals of 25 Bcf, though the South Central increase of 8 Bcf provided an offset.
Despite Thursday’s advance, futures are trading at half the level of late 2022, when winter weather was more intense. ICAP Technical Analysis is not convinced there’s much upside with spring weather on the horizon.
“Still stuck smack in the middle of neutral territory,” ICAP analyst Brian LaRose said Thursday. Absent a new catalyst that drives greater price movement, “we are forced to sit tight and wait patiently.”
Uneven Cash Prices
Spot gas prices varied by region, with retreats in the West but gains in central and southern areas ahead of encroaching cold.
Prices dropped at hubs in the Southwest and Southern California, where mild weather settled in Thursday. SoCal Border Avg. fell $1.140 day/day to average $4.135, and KRGT Del Pool lost $1.575 to $4.600.
In the Midwest, however, Chicago Citygate gained 16.0 cents to $2.510. In the Midcontinent, OGT advanced 11.5 cents to $2.155.
Farther south, Houston Ship Channel rose 11.5 cents to $2.245.
Forecasters Thursday said a looming weather system would deliver freezing air, chilly rains and snow by this weekend, impacting much of the country, and it could linger into next week.
Space City Weather meteorologist Matt Lanza said from Saturday through Monday, cool and breezy conditions could reach as far south as Houston.
“Expect lows in the 40s, highs in the 50s, and at least a slight chance of some pockets of light rain as some weak disturbances pass through in the upper atmosphere,” Lanza said. “I will not be shocked if someone reports brief, light sleet on Saturday or Sunday, especially west of Houston.”
Following a mild break, “additional chilly weather systems will be arriving upstream over the West and Midwest” late next week, with lows ranging from around zero to the 30s, NatGasWeather said. That system is expected to advance across the rest of the Lower 48 by the final week of March “for strong demand,” the firm said.
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