Weekly natural gas cash prices gained ground amid seasonally cool temperatures and corresponding heating needs in the Midwest and Northeast. Spot prices jumped early, climbing 14.0 cents on Monday and laying a strong foundation for the week ahead.
Though prices lost momentum as the week wore on, NGI’s Weekly Spot Gas National Avg. for the May 3-7 period still closed up 3.5 cents to $2.735.
The June Nymex futures contract, meanwhile, settled at $2.958/MMBtu to close the trading week Friday, up 9% from the prior week’s finish.
Cool conditions moved in early during the covered week over the Upper Midwest and Plains before pushing east with lows in the 30s and 40s, galvanizing above average heating demand in key regions that rely on natural gas to power furnaces.
As the trading week closed, hubs across the Midwest and Northeast recorded gains for the five-day trading week. Chicago Citygate advanced 5.0 cents to $2.770, while Lebanon picked up 5.5 cents to $2.715. Meanwhile, Niagara gained 20.0 cents to $2.600 and Tenn Zone 5 200L climbed 19.5 cents to $2.505.
Looking to the week ahead, NatGasWeather said chilly evening lows could propel more heating-degree days.
Colder trends along with “a barrage of weather systems sweep across the U.S. with showers, thunderstorms, and cooler than normal highs of 50s and 60s, lows of 30s and 40s,” early in the week, the forecaster said. This could fuel “stronger than normal late season demand focused over the Midwest/Plains/Great Lakes and Northeast.”
That noted, “cooling will also push into Texas, the South, and Southeast at times to drop very warm conditions into the comfortable highs of 70s to 80s for lighter cooling needs across the southern U.S.,” the firm said.
However, as is usual in May, weather demand will soon fade. NatGasWeather’s outlook calls for “a light national demand pattern for May 13-20 as the southern U.S. becomes warm to very warm” but “countered by HDDs fading across the northern U.S. as highs reach the comfortable 60s to lower 80s.”
Natural gas futures started the week with back-to-back gains on Monday and Tuesday, as liquefied natural gas (LNG) levels were strong – around 11 Bcf — and pipeline exports to Mexico continued to flow at elevated levels near 7 Bcf. Both have been bright spots in 2021.
But by Wednesday, volume eased and traders moved to the sidelines ahead of the U.S. Energy Information Administration’s (EIA) weekly storage report. Futures fell nearly 3 cents on the day.
On Thursday, EIA reported that utilities injected 60 Bcf of natural gas into underground storage during the week ended April 30. The result was bullish relative to expectations.
Ahead of the report, estimates generated by Reuters and Bloomberg polls landed at medians of 65 Bcf, while a Wall Street Journal survey produced an average of 62 Bcf. NGI’s model predicted a 76 Bcf increase.
The latest print also compared favorably to historic figures. EIA in 2020 recorded a 103 Bcf injection for the similar week, and the five-year average is an 81 Bcf build.
But futures slipped again on Thursday — by a penny — as traders instead focused on the likelihood that the build for the April 30 week signaled higher injections in the weeks ahead. Preliminary estimates for the next EIA report were for builds in the 70s-80s Bcf.
“We do feel some loosening will occur in the next few numbers,” Bespoke Weather Services said.
The build for the April 30 week lifted inventories to 1,958 Bcf, though the total was well below the year-earlier level of 2,303 Bcf and slightly below the five-year average of 2,019 Bcf.
By region, the South Central build of 20 Bcf led all others.
Analysts say that, with continued strong LNG and pipeline exports along with the onset of summer cooling demand looming, futures could soon bounce higher.
EBW Analytics Group CEO Andy Weissman said solid exports and other fundamentals support higher prices by summer. Seasonal “peaks in power demand, record LNG and Mexico exports, and a robust domestic economy — all set against flat production — create growing fundamental imbalances,” Weissman said.
With those drivers in place, futures rebounded on Friday and finished up 3.0 cents on the day.
NGI’s Spot Gas National Avg. shed 1.5 cents on Friday to $2.690 for weekend through Monday delivery.
Spot prices failed to bounce back along with futures even as seasonally cool temperatures hung around much of the Midwest and the Northeast, with highs in the 50s from Chicago to Detroit to Boston, according to the National Weather Service (NWS).
The relatively cool temperatures – highs in the 60 or even 70s are more common in May – were expected to linger into the weekend as well, NWS forecasts showed.
While the cool shots spurred demand ahead of the weekend in parts of the Midwest and Northeast, prices in Texas and California fell amid comfortable high temperatures in the 70s and low 80s.
Maxar’s Weather Desk looks for additional rounds of cool air and chilly showers through the coming week, with highs in the 50s and 60 and lows in the 30s and 40s over much of the nation’s midsection, from the Mountain West and eastward.
The firm added, however, “consistency has been lacking” in forecasts through mid-May and temperatures could land “just a few degrees” shy of normal overall.
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