Natural gas futures extended their recent gains in early trading Tuesday amid continued expectations for chilly temperatures over the next week and a half. After picking up 3.5 cents in the previous session, the May Nymex contract was up another 3.0 cents to $2.591/MMBtu at around 8:50 a.m. ET.
The overnight run of the American Global Forecast System (GFS) added heating demand during the April 20-22 time frame, while the European model was milder trending for April 20-26 by showing less cold over the Great Lakes and Northeast, according to NatGasWeather.
“There’s still several cold shots to sweep across the country before then for strong national demand” this week through April 20 as weather systems are expected to bring low temperatures ranging from the 20s to lower 40s, the firm said.
Projected temperatures from both the American and European models are likely “cold enough to be considered bullish” through April 22, but both models favor milder conditions April 24-27 that would result in light natural gas demand, according to NatGasWeather.
“Bulls gained momentum in recent sessions by rallying prices off $2.50,” the firm said. “However, bulls likely don’t feel completely in control with prices only 4-5 cents up from $2.50.” Colder temperatures over the next nine days and strong liquefied natural gas feed gas volumes are providing bullish support for prices, according to NatGasWeather.
“To the bearish side, production has increased several Bcf/d over the past few months, deficits are set to flip back to surpluses” following this week’s U.S. Energy Information Administration (EIA) storage report “and weather patterns April 24-27 aren’t hot or cold enough,” the firm said.
Looking at this week’s EIA report, Energy Aspects issued a preliminary estimate for 69 Bcf injection for the week ending April 9.
A 0.5 Bcf/d week/week drop in production “is insufficient to offset a 5.0 Bcf/d week/week drop in combined residential/commercial and industrial heating” for the report period, Energy Aspects said. “A 1.6 Bcf/d week/week decline in power coupled with a 0.4 Bcf/d week/week drop in net Mexican trade on the extended holiday round out a 7.5 Bcf/d week/week total demand loss.”
Longer term, Energy Aspects is projecting a “bounce back” for industrial demand and commercial load this year, a view that sits on “firmer ground” given that “vaccination rates are speeding up, and numerous states are undertaking broader reopenings.”
The firm pointed to ongoing gains in natural gas use for steel demand. “Additionally, capacity utilization in refining — the second largest sector for industrial gas use — has risen to 84%, the highest level since March 2020.”
May crude oil futures were up 56 cents to $60.26/bbl at around 8:50 a.m. ET, while May RBOB gasoline was up about 1.1 cents to $1.9814/gal.
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