The spring doldrums that the US natural gas market is used to at this time of year will have to wait at least a week before it manifests itself in the spot market. Although gains paled compared to the past few weeks, NGI’s Weekly Spot Gas National Avg. rose 31.0 cents to $6.785/MMBtu in the trading week of April 18-22.
However, Nymex futures fell dramatically amid a weak near-term outlook. After hitting a weekly high of $8.065 on Monday, the May contract was locked in at $6.534 on Friday, part of an ongoing technical correction on profit-taking.
The continued strength in the spot market comes from the persistent cold in parts of the country, which supports heating demand. In the Northeast alone, for example, warmer weather finally prevailed in most parts of the region towards the end of the week. The National Weather Service said high temperatures were forecast in the Ohio Valley on Saturday and in the mid-Atlantic on Sunday in the 80s. However, below average and cooler temperatures were expected to persist in most parts of New England.
The history of two regions was reflected in pricing, NGI data showed. At Algonquin Citygate, spot gas prices averaged $7,090 for the April 18-22 period, up 76.0 cents on the week. Conversely, in Transco Zone 6 outside of NY, prices rose a more muted 24.5 cents to $6,540.
Demand and prices were also higher in the west, where a violent April storm brought mostly rain and some snow to the region. Cash prices in northwest Sumas averaged $6.745 for the April 18-22 trading period, up 16.0 cents on the week. PG&E Citygate was 26.0 cents higher at $7,920 while SoCal Border Avg. was 28.0 cents higher at $7.030.
Elsewhere in the country, gains were between about 20.0 cents and 40.0 cents at most price points.
Down but not out
The downside has been a bit bumpy for Nymex futures.
The May contract was strong from the start of Monday’s session, rallying to an intraday high of $8.065 before settling at $7.820 for the day, still a respectable gain of 52.0 cents.
But Tuesday brought the first cracks. The prompt month opened the session at $7.776 but then plummeted to $7.176 by the close. Losses continued on Wednesday, with May ending below $7,000, despite little change in the otherwise supportive backdrop.
Finally, production growth remains elusive in the supply-demand balance, and while LNG volumes have declined due to maintenance, weather demand has continued to surprise on the upside. There’s also that pesky memory deficit that has improved very little so far this injection season.
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On Thursday, the Energy Information Administration reported a 53 Bcf build, taking inventories to 1,450 Bcf, still 428 Bcf below last year’s level and 292 Bcf below the five-year average.
At a regional level, south-central stocks rose a net 33 Bcf, including 18 Bcf of non-salt stocks and 15 Bcf of salts, according to the EIA. The Midwest added 11 Bcf to storage while the East added 9 Bcf. Pacific inventories were flat this week and the Midwest subtracted 1 Bcf.
In reviewing the data, The Schork Group noted that the 33 Bcf plant at South Central was the fourth consecutive injection of the season adding a total of 91 Bcf. This is 12 Bcf (15%) above the seasonally adjusted trendline.
The Midwest and East each recorded their first injections of the season with builds of 11 Bcf and 9 Bcf, respectively, which Schork analysts say is “a good start.” However, the group warned that “we need to see a lot of good injections in the coming weeks as the market pulled back 113% of the previous summer’s refill last winter.”
Indeed, cool April weather, which lasted until early May in some parts of the country, has all but ensured that deficits will remain close to the 300 bcf mark for the foreseeable future. That leaves the market with a huge load for the remainder of the summer when cooling loads are expected to increase across the country.
Still, the near-term weakness in fundamentals proved too much for the bulls to overcome. After a brief dip in late Thursday’s session, Nymex futures extended losses on Friday. The May contract closed near the bottom of its broad trading range of 64.1 cents, down 42.3 cents d/d.
According to Bespoke Weather Services, the market is now at important levels from a technical perspective. The $6.50 price level marks the point of the major multi-year breakout that the market has seen previously.
“It remains to be seen if this is just a backtest or if we continue to stay lower as we head into May contract expiry next week,” it said. “Again, the big bullish case for later this year isn’t out the window. It just seems like any significant upside will be more difficult in the near term.”
rain cash
April showers in the form of spot gas prices were seen on Friday, covering gas deliveries through Monday, with losses spreading across the Lower 48 on a mostly moderate temperature outlook.
NatGasWeather said national demand is expected to be low through the weekend as warm high pressure builds in the southern and eastern halves of the country. Daytime temperatures should reach the 60s to 80s, although hotter weather was expected in Texas. In the cities near the Canadian border, on the other hand, it should be cooler.
“Where the pattern remains sufficiently cold is from April 26 to May 3, when cool late-season weather systems return to the northern US,” the forecaster said.
Overnight lows from Tuesday were forecast to fall into the 30s, while highs would peak in the 50s and 60s. At the same time, the Southwest as far north as Texas should be relatively hot, NatGasWeather said, with highs of over 80 to near 100 for modest early-season cooling needs.
Still coming off recent highs and without strong near-term demand, the Northeast saw the biggest day-to-day price declines. Spot gas prices for 200L in Tenn’s Zone 6 fell 91.0 cents on Friday to average $6,000 for gas deliveries through Monday. Transco Zone 6 NY lost 48.5 cents to $5.705 while Eastern Gas South fell 41.5 cents upstream to $5.585.
The west coast also caused a sensation with prices of up to 77.0 cents that day.
Losses in the 20.0 to 30.0 cent range were the norm across most of the rest of the country. Henry Hub Spot Gas fell 32.5 cents to $6.550 and OGT slipped 34.5 cents to $5.870.
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