May natural gas futures slid to the front on the first day; Holiday weekend lowers cash prices

The May Nymex natural gas futures contract broke the lead in its first session and was anchored to the decline amid an excess of bearish fundamentals, particularly abundant supply met by insufficient demand.

At the first sight:

  • A quick month will spend 7.0 cents
  • Storage is expected to be removed
  • Bearish spring weather awaits us

The newly anointed front-month contract fell 7.0 cents day/day to settle at $1.718/MMBtu. The contract fell from an intraday high of $1,789 to a low of $1,704.

Analysts at Gelber & Associates said: “The new front month appears to be returning to the April settlement price.”

The April contract fell off the board to $1,575 on Tuesday, falling for a fifth straight session to the lowest April expiration since April 1995, according to Bloomberg data.

Point gas NGI National avg. stumbled 12.0 cents to $1,235. Traders have moved the four-day pack from Thursday to Sunday ahead of the Good Friday/Easter Sunday holiday weekend.

The market is washed with natural gas. After injecting 7 Bcf into natural gas supplies for the week ending March 15, total working gas supplies reached 2,332 Bcf, 678 Bcf above the five-year average.

The U.S. Energy Information Administration (EIA) is expected to release its next data sheet covering the week of March 22 at 10:30 a.m. ET on Thursday. Cold weather during the inspection week is expected to have led to a return to stockpiling.

NGI modeled a draw of 25 Bcf. Estimates compiled by Reuters ranged from withdrawals of 23 Bcf to 32 Bcf, with an average of 28 Bcf. A Bloomberg survey led to an average pick of 27 Bcf.

A draw in the expected range would compare to a five-year draw average of 27 Bcf and a previous draw of 55 Bcf.

Analysts at Gelber said projected end-of-season storage estimates are around 2.23 Tcf. That’s “an extremely robust amount of gas to start the injection season.

“With producers continuing to cut production and demand tracking at seasonal lows, it doesn’t look like the bulls or bears have much to hold on to, except for storage,” said Gelber analysts.

Demand the most pressures

The market has been anticipating several periods of cold weather blasts to push inventories lower ahead of the start of the high season.

Price Futures Group senior analyst Phil Flynn told NGI: “A bit of unseasonably cold weather could offset the fact that we may see some reduced demand due to the Easter holidays.”

However, the latest weather outlook for supportive demand has been disappointing. NatGasWeather said there will be a “wimpier cold shot” across the country from April 2-4, followed by stronger warming across most of the US from April 5-10.

The midday US weather model was warmer than the morning forecast, with the April 2-4 cold snap covering less ground “to the point where it’s barely cold enough now,” NatGasWeather said. The midday European model also trended warmer for April 5-10, while on track to lose another 15 or more heating degree days from April 1-10.

Meanwhile, some manufacturers have cut production to curb excess supply. Wood Mackenzie Lower 48 production wastes reported a decline in output to 99.3 Bcf/d on Wednesday from a recent seven-day average of 100.4 Bcf/d.

But despite production curbs and combined with weak residential/commercial (res/com) demand due to spring weather, demand for gas to LNG export facilities fell to 12.1 Bcf/d on Wednesday, from around 13.0 Bcf/d for several days data from Wood Mackenzie previously showed.

Early Wednesday, EBW Analytics Group analyst Eli Rubin noted an apparent decline in incoming gas volumes at the Corpus Christi and Calcasieu Pass LNG terminals. NGI US LNG Export Tracker reported operating capacity at 58% at Corpus Christi and 56% at Calcasieu Pass.

Flynn told NGI that LNG will not be affected by the collapse of the Francis Scott Key Bridge in Baltimore Harbor into the Patapsco River on Tuesday “because the Cove Point export facility is further south, so it will not be affected by the bridge.”

But he said a slowdown in coal exports could increase demand for natural gas. “Delivery will be harder to find, and that should be generally supportive.”

In the first nine months of 2023, Baltimore was the second-largest port for U.S. coal exports behind Norfolk, Va., according to the latest EIA data. Roughly one-fifth of U.S. coal exports went through Baltimore in 2022, the EIA said.

Cash Sinks Revised

Natural gas prices traded Thursday through Sunday were lower on Wednesday, pressured by holiday-suppressed demand.

While a few centers managed to make modest gains, the main trajectory was down, with the Midwest among the biggest losers.

At the beginning of the week, the central part of the country was hit by a storm. But the latest forecasts from the National Weather Service (NWS) showed a warming trend in the Midwest that would take temperatures from the high 40s on Wednesday to the 60s on Sunday.

Due to expected weak holiday and weather-driven demand, Chicago Citygate the average fell 14.0 cents to $1,295 a Dawn fell 11.5 cents to $1,455, helped by ca Midwest Regional Avg. down 14.0 cents to $1,320.

Excess supply in Texas coupled with lackluster demand was a drag S.TX Regional Avg. 24.0 cents lower at $1.070 E.TX Regional Avg. fell 12.5 cents to $1,200 a W.TX/SE NM Regional Avg. down 6.0 cents but managed to remain positive at 8.5 cents.

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