Weekly spot gas prices, flounder futures amid mild weather outlook, weakness in West Texas

Weekly cash natural gas prices retreated despite cool temperatures and lower production data to kick off the spring season.

In the abbreviated Good Friday holiday week, NGI’s Weekly Spot Gas National avg. it fell 5.5 cents to $1,300/MMBtu in the March 25-27 trading period. The gas in the period was supposed to flow from March 26 to March 31.

Futures also fell over the period.

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After a mostly mild winter and record production of around 107 Bcf/d in early 2024, conditions have changed in recent days. Freezing weather moved down from Canada, bringing freezing temperatures and snow to swathes of the Rocky Mountains and the central and eastern United States, prompting a seasonally strong dose of heating demand earlier in the season.

Production, meanwhile, fell to around 100 Bcf/d during the week, according to Wood Mackenzie, due to a combination of maintenance actions and planned curtailments. Major exploration and production companies, incl Chesapeake Energy Corp. and EQT Corp., have recently slowed production in an effort to balance the market.

Still, the weather outlook, including a warm start to April in key gas-consuming regions of the Midwest and Northeast, along with heavy price pressure in West Texas, overshadowed bullish undercurrents.

When the business week closed, Chicago Citygate fell 11.5 cents to $1,365 Algonquin City Gate near Boston, it fell 33.5 cents to $1,590.

Benchmark of West Texas Wow, meanwhile, recovered 28.0 cents but still averaged negative 26.5 cents. Maintenance actions that suspended the take-off capacity accordingly record levels of associated gas production in the Permian Basin has tied up excess supply in the region. This led to negative prices much of March.

“Weak physical clearing prices throughout March” also dragged down futures trading, said EBW Analytics Group analyst Eli Rubin.

The Nymex April futures contract expired with a whimper. It lost ground on both Monday and Tuesday before ceding prompt month status to the May contract, which dipped lower on its debut. May settled at $1,763 on Thursday, up 4.5 cents on the day but down 3% from the previous week.

Bears “rejoiced until the end of April,” analysts at The Schork Report said.

Futures struggled with impacts on export demand and forecasts of favorable weather.

Lower demand from the Freeport LNG export facility in Texas was the main culprit. It recently put its 3 train back into service after months of repairs, but disconnected trains 1 and 2 at the LNG terminal for more controls this month.

On the domestic demand front, NatGasWeather expected declining demand in the week ahead. It said there would be “still cold air near the Canadian border with highs in the 30s-40s” at the start of the coming business week, “although it just won’t cover enough ground to scare it away”.

In addition, the firm said that starting around the middle of the first week of April, “the high pressure will strengthen and any relatively cool air will retreat near the Canadian border.” If the forecasts hold, there will likely be no peak 30s coverage anywhere in the US due to very low demand. Overall, the weather is seen as neutral until April 4th and strongly bearish from April 5th to 11th.”

Storage overflow

The US Energy Information Administration (EIA) printed a 36 Removing Bcf from storage which beat analysts’ expectations for a draw in the high 20s Bcf. The five-year average for the week ending March 22 was a draw of 27 Bcf.

Still, the press had little impact on supply abundance in the Lower 48. Operating gas in storage remained more than 40% above the five-year average. As such, the futures market was mostly flat on Thursday.

Analysts at Gelber & Associates said there is “extremely large amounts of gas” in storage ahead of the traditional injection season. “With manufacturers continuing to shed production and demand following seasonal lows, it doesn’t appear that market bulls or bears can hold out” beyond the possibility of shifts in inventory data.

The latest draw left lower 48 inventories at 2,296 Bcf, well above the five-year average of 1,627 Bcf.

By region, the Midwest and East regions led the way with draws of 23 Bcf and 19 Bcf, respectively, according to the EIA. South Central reported a decrease of 2 Bcf. Pacific inventories rose by 7 Bcf, while Mountain region inventories were flat.

Early withdrawal estimates provided to Reuters for the March 29 EIA inventory period ranged from 20 Bcf to 53 Bcf, with an average decline of 31 Bcf. That compares with a draw of 29 Bcf a year earlier and a five-year average decline of 1 Bcf.

Thursday cash prices

Next-day prices ended the shortened trading week on a high with NGI Spot Gas National Avg. up 8.0 cents on the day to $1,315.

The gas traded on the day was for delivery from Friday to Monday, a period during which forecasts called for freezing lows in the 10s to 30s in parts of the Midwest and East. Prices have also rebounded from some of the lowest levels in recent years.

Joliet in the Midwest gained 21.0 cents day/day to average $1,530, while OGT in the Rockies advanced 18.0 cents to $1,190.

in the east, Columbia Gas rose 11.0 cents to $1,380 a Transco Zone 5 gained 17.5 cents to $1,565.

While spring weather is forecast to do little for bulls in early April, looking further ahead, the coming summer is likely to create cooling demand. If AccuWeather’s outlook turns out to be accurate, an active hurricane season could reduce inventories. Heavy storms can disrupt production operations. The Atlantic hurricane season officially begins on June 1st.

“There are signs that the former system could spin up before the season starts” and serve as “a harbinger of things to come,” AccuWeather meteorologist Brian Lada said. “The stage is set for a turbulent year in the tropics, one that could approach a record pace that may exhaust the entire list of names for tropical storms and hurricanes — and then some.”

Sea surface temperatures are well above average across much of the Atlantic basin, according to AccuWeather. Such conditions increase the potential for storm systems to rapidly intensify. This has occurred in recent years with historically strong hurricanes. A La Niña weather pattern is also expected to form this summer. La Niña periods tend to lead to hurricanes, AccuWeather said.

AccuWeather’s 20-25 forecast named storms across the Atlantic basin in 2024, including eight to 12 hurricanes, four to seven major hurricanes, and four to six U.S. direct hits. Those numbers are all above the 30-year historical average of 14 named storms, seven hurricanes, three major hurricanes and four direct U.S. landfalls, the firm said.

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