Natural gas futures prices rebounded Thursday as the government’s weekly inventory report proved bullish, and both weather forecasts and demand for U.S. exports remained favorable.

Storage Report

The May Nymex contract settled at $2.658/MMBtu, up 4.0 cents day/day. June gained 3.7 cents to $2.730.

NGI’s Spot Gas National Avg. rose 4.5 cents to $2.565, continuing a weeklong rally amid chilly conditions and seasonally strong heating demand in the eastern half of the country.

The prompt month ticked down by a tenth of a cent on Wednesday, ending a five-day winning streak. But a well-received U.S. Energy Information Administration (EIA) storage result for the week ended April 9 reopened the momentum door for futures.

EIA reported an injection of 61 Bcf natural gas into storage. That was below median estimates found by major polls and the year-earlier injection of 68 Bcf.

The injection was “well under our estimate of 72 Bcf, and on the low end of the range of all market estimates,” Bespoke Weather Services said. “In our models, this is a strong number, confirming the tightening of balances we have been seeing over the last few weeks.”

Prior to the report, a Bloomberg survey found injection estimates ranged from 62 Bcf to 79 Bcf, with a median of 67 Bcf. The median of a Reuters poll landed at a build of 66 Bcf; injection estimates spanned 50 Bcf to 79 Bcf. NGI forecasted an injection of 67 Bcf for the period.

The latest build lifted inventories to 1,845 Bcf, below the year-earlier level of 2,087 Bcf and roughly in line with the five-year average of 1,834 Bcf.

NatGasWeather noted it was warmer than normal over most of the Lower 48 last week. However, weak weather demand was countered by strong U.S. liquefied natural gas volumes (LNG) and pipeline exports to Mexico.

“To the bullish side has been a couple tighter-than-expected builds the past two weeks, a cold enough weather pattern for the coming eight to nine days, and LNG feed gas and Mexico exports near record highs,” NatGasWeather added.

Exports remain strong this week as well, with LNG feed gas volumes above 11 Bcf/d and exports to Mexico near 7 Bcf/d. Production, meanwhile, is holding steady and domestic weather-driven demand is improving, leading analysts to predict a lighter build with the next storage report.

Bespoke estimated an injection of 46 Bcf. “The supply/demand balance has improved, thanks to strong exports,” the firm said.

NatGasWeather said Thursday that the European weather model dropped heating demand overnight, bringing it in better agreement with the American model, which was largely unchanged in its projections for the rest of April.

“Both forecast a solidly bullish pattern” through April 24 “as a series of colder-than-normal weather systems sweep across the country, the coldest over the Midwest and Great Lakes,” the firm said. “However, the overnight data maintained national demand easing to light levels April 25-29 as much of the U.S. becomes comfortable.”

Meanwhile, analysts increasingly anticipate stronger energy demand alongside an improving U.S. economy. Greater commercial and industrial activity could drive more use of natural gas.

The economic news picture brightened further on Thursday with a pair of government snapshots.

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Retail sales spiked 9.8% in March, the U.S. Commerce Department reported, as more stores reopened amid vaccination programs and Americans put government stimulus checks to use. It marked the biggest jump in 11 months. Consumer spending accounts for about two-thirds of U.S. economic activity.

Separately, the U.S. Labor Department said claims for initial unemployment benefits dropped to 576,000 last week from 769,000 a week earlier. Jobless claims are now at their lowest level since March of last year.

There is room for more improvement, said Scott Brown, Raymond James & Associates Inc.’s chief economist. Currently, he said, U.S. payrolls are about 9 million below the pre-pandemic level.

“As the pandemic recedes and the economy reopens, we can expect strong job growth in the months ahead,” he said. “We may soon see monthly gains in nonfarm payrolls of a million or more.”

Cash Cruises

Spot gas prices advanced again on Thursday, as they have each day this week amid favorable weather. Chilly air has permeated much of the nation’s midsection and swaths of the east so far this week. Forecasters expect more cold in the days ahead.

“A barrage of colder-than-normal weather systems will sweep across the U.S. the next 10 days, coldest over the Midwest and Great Lakes with lows of 20s and 30s,” NatGasWeather said. “Where the weather data added demand since the start of the week was with a colder trending weather system across the northern U.S. April 20-24 to make the April 14-24 period solidly bullish.”

Price gains were most pronounced in the Northeast, where PNGTS jumped 27.0 cents day/day to average $3.160. Algonquin Citygate spiked 81.5 cents to $3.170 and Tenn Zone 6 200L climbed 47.5 cents to $3.080.

Hubs in the West also posted solid advances. SoCal Citygate gained 12.5 cents to $4.000, while Southern Border, PG&E tacked on 20.0 cents to $2.605 and SoCal Border Avg. added 7.5 cents to $3.180.

On the pipeline front, Algonquin Gas Transmission (AGT) said that, beginning Friday, it would perform several maintenance events this spring and into the summer. This could cut up to 547 MMcf/d of flows on the most restricted days, said Wood Mackenzie analyst Anthony Ferrara.

In the near term, he said, “we are not currently forecasting any significant cold weather patterns in New England over the next 14 days, but should weather revise significantly colder, we could see two things: First, we could see a bullish price effect, or second, we could see AGT revise its maintenance schedule to accommodate higher demand on its system.”