With natural gas traders left to factor in potential volatility from the expiration of the April contract on top of the broader uncertainty hanging over the market from Covid-19, futures were trading slightly lower early Friday. The April Nymex contract was off 2.4 cents to $1.613/MMBtu at around 8:40 a.m. ET.
The Global Forecast System trended colder overnight, while the European data dropped heating demand from the outlook, according to NatGasWeather. But at this point, weather’s influence on price action has become much less clear “with so many other factors in play, ranging from impacts from Covid-19, oil price wars, expiration of April 2020 contracts, financial stimulus and huge daily moves in oil, gold and equities,” the forecaster said.
“The weather data isn’t as bearish compared to earlier in the week, but it’s still not bullish,” NatGasWeather said. “Today’s trade could endure quick price swings as April 2020 futures expire and due to expected big moves in other asset classes.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 29 Bcf weekly withdrawal from U.S. natural gas stocks, lighter than the 39 Bcf withdrawal recorded in the year-ago period and the five-year average pull of 40 Bcf. Total Lower 48 working gas in underground storage stood at 2,005 Bcf as of March 20, 888 Bcf (79.5%) above year-ago stocks and 292 Bcf (17.0%) higher than the five-year average.
Analysts at Tudor, Pickering, Holt & Co. (TPH) described this week’s EIA storage number as a “non-event.” Not only was the figure close to consensus, but the market’s focus has shifted to demand destruction amid the Covid-19 pandemic and weakness in liquefied natural gas (LNG) pricing, they said.
“Four days into shutdowns, the impact on gas demand is far from clear,” the TPH analysts said. “On a week/week basis, demand is down 1.9 Bcf/d, but residential/commercial makes up half the delta and is the most prone to seasonal fluctuations; industrial demand is down 0.3 Bcf/d week/week and 0.8 Bcf/d year/year.”
Meanwhile, for LNG, TPH estimates showed current utilization for U.S. exports at 106%, with Sabine Pass “running above 4 Bcf/d after averaging closer to 3 Bcf/d last week due to weather issues. As we move through 2Q we expect utilization to come down, based on our spot spread estimates that show shipments to Europe out of the money from April through September.”
May crude oil futures were off 84 cents to $21.76/bbl at around 8:40 a.m. ET, while April RBOB gasoline was up fractionally to around 54.8 cents/gal.
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