• BREAKING: U.S. EIA on Thursday reported a withdrawal of 11 Bcf from natural gas storage for the week ended March 12
  • April Nymex contract declined 3.4 cents day/day on Wednesday and settled at $2.528/MMBtu

Natural gas futures dropped back into the red on Wednesday as traders mulled forecasts for mild spring weather and its dampening effect on demand along with polls that showed expectations for only a modest storage withdrawal.

EIA storage march 12

The April Nymex contract declined 3.4 cents day/day and settled at $2.528/MMBtu. May fell 4.2 cents to $2.555.

The prompt month had gained 11.6 cents Tuesday, a rare advance in March, though analysts attributed that bounce in part to technically oversold conditions. Robust liquefied natural gas (LNG) levels – above 11 Bcf/d throughout this week, near records – also provided a boost.

Still, light domestic demand, the key detriment to futures this month, re-emerged as an overriding concern Wednesday. The prompt finished in the red for the ninth time over the past 11 sessions.

Weaker weather demand also kept next-day cash prices in check across much of the country. NGI’s Spot Gas National Avg. ticked up 3.0 cents to $2.440.

“The pattern maintains its skew in the warmer direction rather solidly, thanks to warmer than normal conditions primarily from the Midwest to East, with the strongest anomalies coming this weekend into the first half of next week,” Bespoke Weather Services said of forecasts for the rest of this week and next.

“This keeps March on pace to be quite warm…Outside of the two cold weeks in February, this warmer state has been very persistent, and we still believe this continues as we move into April,” the firm added. “While not the most important time of year as far as weather’s impact in the natural gas market, warmth is still a bearish component to consider over the next several weeks, until we reach the month of May when we begin to transition” to summer and national cooling demand.

Bespoke noted strength in LNG volumes, steadied production levels and stable or improving power burns over the last several days given lower gas prices. All could support a brighter fundamental picture, the firm said, but broadly stronger weather-driven demand may still be needed to drive a sustained rally.

“We maintain our neutral stance, which we likely will hold at least until seeing what shows up” in Thursday’s Energy Information Administration (EIA) storage report. Bespoke’s model estimated a pull from inventories of 10 Bcf for the week ended March 12.

EIA is scheduled to release its weekly storage report at 10:30 a.m. ET.

Storage Estimates

A Bloomberg survey found withdrawal estimates ranging from 14 Bcf to 20 Bcf and a median of 18 Bcf. The median forecast in a Reuters poll, meanwhile, landed at a pull of 16 Bcf, with draw estimates spanning 1 Bcf to 29 Bcf.

The Wall Street Journal’s weekly survey produced withdrawal estimates that ranged from 14 Bcf to 29 Bcf, with a 22 Bcf average decrease.

NGI estimated a 14 Bcf pull for the latest week. Last year, EIA recorded a 15 Bcf decrease for the period, and the five-year average is a withdrawal of 59 Bcf.

If the midpoints of polls prove accurate, stockpiles of underground gas would exceed 1.75 Tcf.

That is lower than a year earlier and reflects in large part substantial withdrawals amid the freezing temperatures last month in Texas that drove up demand and cut into storage surpluses. But since mid-February, demand has eased notably and pulls from storage have shrunk in tandem, disappointing markets.

EIA reported a withdrawal of 52 Bcf for the week ended March 5, short of expectations for a pull in the 70s Bcf. That followed a 98 Bcf withdrawal for the week ended Feb. 26, well off estimates that clustered around a draw in the 130s-140s Bcf.

“An end-March carryout of approximately 1.7 Tcf is coming into sharper focus after February was defined by weather swings and EIA report shockers,” analysts at Energy Aspects said. A 1.7 Tcf end of season “would be 100 Bcf below the five-year average and lower by 300 Bcf year/year, although 250 Bcf above our pre-winter estimate due to higher production and lower residential/commercial demand than originally forecast.”

The firm is modeling a total injection from April through October of slightly more than 1.7 Tcf, which would bring Lower 48 inventories to 3.4 Tcf by the start of the 2021/22 heating season.

“This is below the 1.9 Tcf build from 2020, although the difference lies entirely in 2Q2021, indicating that stronger year/year demand from the Covid-19-addled baseline will account for the lion’s share of injection constraints in 2021,” the Energy Aspects analysts said.

Trading Sideways

Next-day cash prices inched ahead on Wednesday, narrowly avoiding a three-day losing streak.

Weather across the Lower 48 during that stretch proved eventful, with snow across the Rockies and Plains early in the week and bouts of rain over swaths of the nation’s midsection on Wednesday.

But even where precipitation was lofty, temperatures remained generally comfortable, with highs ranging from the 30s to 50s in northern regions and temperatures rising much higher in the South, according to National Weather Service (NWS) estimates.

NWS forecasts show weather systems with chilly rains and potential snow tracking into the East on Thursday and Friday, potentially leading to regional increases in heating demand. But by the weekend, light national overall demand is expected to develop and continue into next week, with highs ranging from the 50s to 80s over most of the country.

Against that backdrop, spot prices were mixed across the country and within regions.

In California, Malin shed 3.0 cents day/day to average $2.350, but SoCal Border Avg. advanced 5.5 cents to $2.665.

Elsewhere, Chicago Citygate in the Midwest picked up 3.5 cents to $2.430, while Emerson dipped 1.5 cents to $2.335.

In Appalachia, meanwhile, Dominion South gained 6.0 cents to $2.075 and Tenn Zone 4 200L lost 9.5 cents to $2.150.