Natural Gas Bulls Regain Momentum After EIA Stock Data; Drop in spot prices

Despite some hesitation at the start of Thursday’s trading session, natural gas futures surged after the latest government inventory data showed a dramatic close to the withdrawal season. May Nymex gas futures settled at $6.359/MMBtu, up 33.0 cents from Wednesday’s close. June picked up 32.9 cents to hit $6.436.

In short :

  • EIA reports 33 billion cubic feet likely drawing last draw of season
  • Cool temperatures observed until April
  • LNG demand rebounds, but planned works continue

Gasoline spot prices lagged, led by the Northeast with declines of nearly 70.0 cents. NGI’s Spot Gas National Avg. fell 21.0 cents to $5,900.

Futures rallied early on Thursday, in part because weather patterns continued to shift, with the 15-day outlook now looking a little cooler than normal. May futures climbed near $6.25 before faltering ahead of the Energy Information Administration’s (EIA) weekly storage report. The EIA reported a drawdown of 33 billion cubic feet from inventory for the week ending April 1, a larger than expected drawdown.

The news revived the bulls’ momentum. The May Nymex contract was trading nearly flat that day at $6.037 ahead of the EIA report and quickly jumped 4.0 cents as the 33 billion cubic feet figure crossed the trading desks.

“A low number for storage… is going to be an interesting summer,” said one participant on The Desk’s online energy chat, Enelyst. “Not the number you want to see if you’re in the big spring injection camp,” said another attendee.

The EIA’s withdrawal of 33 billion cubic feet was well within the expected range of 3 billion cubic feet to 44 billion cubic feet. However, several Enelyst participants noted that their projections had been revised upwards in recent days. Enelyst chief executive Het Shah said power consumptions were high throughout March. However, given the transition from spring to winter, it can be difficult to accurately predict the impact on storage.

Last year, 19 billion cubic feet were injected into storage in the same week, while the five-year average is 8 billion cubic feet.

Broken down by region, Eastern inventories fell 27 billion cubic feet and Midwest inventories fell 21 billion cubic feet, according to the EIA. South-central inventories rose a net 8 billion cubic feet, split evenly between salt-free and saline facilities. The Pacific and Mountain regions each added less than 5 billion cubic feet.

Total working gas in storage as of April 1 was 1,382 billion cubic feet, down 399 billion cubic feet from last year at this time and 285 billion cubic feet below the five-year average, a said the EIA.

Looking ahead to the upcoming EIA inventory report, market watchers expect injections to resume despite persistent cold weather this week. Wind generation is also strong. Early estimates among Enelyst participants indicated a build ranging from teens to 30 billion cubic feet.

Cool changes keep coming

The latest weather patterns also kept the market on edge.

NatGasWeather said the Global Forecast System (GFS) overnight added 22 heating degree days to the 15-day outlook for colder trends in the northern United States. However, European data was little changed in the first 10 days and only a bit cooler from April 16-21.

The midday GFS returned some of the demand it had gained overnight, but remained cooler than the European model as a whole.

NatGasWeather expected an increase in demand from Friday to Sunday as a cold snap headed east. A return to mild domestic demand was expected next week as a warm ridge established over the eastern half of the country, with daytime temperatures forecast to reach the 60s to 80s. GFS and European patterns trended colder with weather systems in the North April 16-20.

“No change in our overall view, with a mix of mild and seasonal demand over the next 15 days, but broadly strong enough to lock in shortfalls between 260 Bcf and 300 Bcf for the foreseeable future,” NatGasWeather said.

EBW Analytics Group LLC noted that independent forecaster DTN’s forecast extended cooler-than-normal weather into week four, with pronounced cold anomalies driving overnight heating demand across the Upper Midwest. The Julian Madden Oscillation hinted at a warming of the Southwest Pacific, which could attract attention, according to EBW. The firm said temperatures in Los Angeles were expected to reach the mid-90s through Friday.

“Still, the seasonal advance through the last week of April could result in a drop of 19 gas HDDs from week three onwards, as normals warm rapidly,” said Eli Rubin, principal analyst at EBW. He noted that gas demand due to weather conditions could drop by 5.2 billion cubic feet per day per week.

“Weather-driven demand in April is reducing the natural gas market’s ability to release large and repeat injections in the shoulder season, hampering its efforts to reduce the storage deficit and raise the storage trajectory on a healthier way before summer,” Rubin mentioned.

Recovery of LNG demand

Meanwhile, after falling earlier in the week, feed gas deliveries to U.S. liquefied natural gas (LNG) terminals rebounded on Thursday. NGI data showed volumes jumping to 12.5 billion cubic feet, from 11.8 billion cubic feet on Wednesday. However, this remained well below the 14 Bcf/d mark reached at the start of the month.

While greater inflow was seen at Sabine Pass, Freeport would be closed until April 21 for scheduled maintenance. LNG producers often use the spring shoulder season to perform maintenance activities, as weather-related demand is generally lower at this time of year.

Scheduled maintenance aside, the call for U.S. LNG is expected to remain robust through this year as Europe struggles to wean itself off Russian gas following its invasion of Ukraine. In the latest development amid the dispute, the Senate voted on Thursday to strip Moscow of its preferential trading status with the United States. He also banned the import of Russian energy into the United States.

The legislation would allow the United States to impose higher tariffs on Russian products and cut off an important source of income for President Vladimir Putin. However, Russian energy represents only a small part of US energy imports.

The House was expected to pass the measures Thursday night before sending the legislation to President Biden.

The possibility of completely cutting off Russian energy supplies to Europe has kept global markets on heightened alert. Yet Europe also has an immediate need for more supplies.

Maxar’s weather office said below normal temperatures are expected to spread across northern/northwestern Europe over the next few days. Although warmer than normal conditions were expected in southeastern Europe, cold anomalies were observed expanding in the continental region and the Baltic States over the period. By day 11, a return to more normal conditions was likely, according to the forecaster.

As for the impact of the urgent need for non-Russian supply on the Lower 48, EBW’s Rubin said that at current price levels, there are few short-term fundamental mechanisms left for the market to react to price changes. some gas. Despite potential downside catalysts over the next six weeks in the form of warmer weather and LNG maintenance, EBW continued to view Nymex futures as potentially undervalued through winter 2022. -23. As a result, “the structurally asymmetric rise could be priced in” sooner than expected.

“The January 2023 contract has already cleared $6.50, and cumulative gains for next winter have driven the Nymex 12-month futures strip higher,” Rubin said. “Despite the market’s tendency to focus primarily on the near to medium-term outlook at the start of injection season, resolved strength further out on the futures curve can be a leading indicator of continued short-term price strength. term to come.”

Drop in spot prices

Spot gas prices were lower across the board as temperatures rose steadily across the Lower 48.

The Northeast led the way, with next-day gas PNGTS slipping 52.5 cents day/day to $6.395 and non-NY Transco Zone 6 falling 40.0 cents to $5.765.

Appalachia also saw steep declines. Columbia Gas was down 25.0 cents at $5,670 and Transco Leidy Line was down 36.5 cents at $5,650.

The National Weather Service (NWS) said there would be a strong flow of moisture from the Atlantic to the northeast until early Friday morning, resulting in excessive rainfall ending at noon. Lake effect snow was expected to form over the upper Great Lakes below the upper level low. The heaviest lake effect snowfall was forecast over western parts of Michigan’s Upper Peninsula.

Additionally, rain and snow showers are expected to continue over parts of the upper Great Lakes and the upper and middle Mississippi Valley through Saturday. Snow was expected to form over parts of central Appalachia Friday night through Saturday.

Despite late season cold, Consumers Energy spot gasoline fell 27.0 cents to $5,945, while Ventura fell 21.0 cents to $5,925.

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