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May gas turns lower as market looks to storage

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


May gas turns lower as market looks to storage

Gainsin May natural gas futures to a $2.041/MMBtu intraday high failed to hold asparticipants considered recent gains overdone amid the impending arrival ofspring weather and a natural gas supply expected to beat the previous recordhigh at the close of withdrawal season. The contract settled the Tuesday, April5, session at $1.954/MMBtu, lower by 4.4 cents.

TheU.S. Energy Information Administration will issue its final natural gas storagefigure for the titular withdrawal season at 10:30 a.m. ET on Thursday, April 7.Expectations for the report show possible injections from as little as 1 Bcf toas much as 15 Bcf, which would be bearish against the 19-Bcf five-year-averagewithdrawal, and at consensus calling for a 9-Bcf injection, would be slightlyabove the 6-Bcf build reported for the same week in 2015.

Thetotal working natural gas supply would reach 2,477 Bcf with a build at theconsensus figure, besting the previous end-of-season record high of 2,473 Bcfreached on March 31, 2012. An injection at consensus also would widen theyear-on-five-year average surplus to 871 Bcf and the year-on-year surplus to1,005 Bcf.

Thenatural gas inventory remains a weight on natural gas futures, continuing as aclarion call to the market to sway it to the downside, even as lingering coldweather attempts to persuade the market higher.

Thelatest revisions to weather forecasts from the National Oceanic and AtmosphericAdministration show lingering below-average temperatures in portions of thecountry in both the six- to 10-day and eight- to 14-day periods.

Inthe near-term outlook, below-average temperatures will dominate across theeastern half of the country, stopped by average temperatures in portions of theSoutheast, Gulf Coast and central U.S. and by above-average temperatures inFlorida, portions of the Gulf, Texas and the Northwest.

Below-averagetemperatures turn patchy in the eight- to 14-day period, gripping portions ofthe Northeast, north central, Mid-Atlantic and Southeast, as well as a portionof the Southwest. The remainder of the country will see a mix of average andabove-average temperatures.

Allin all, the weather should begin to alleviate some of the lingering heatingdemand, allowing for a respite ahead of the onset of strong cooling demand asspring transitions into summer.

Lackingthe demand, natural gas inventory erosion is not expected at any significantpace, leaving a supply that could prove a challenge for the market when thefall injection season begins, particularly with a summer season that could becooler than normal.

However,most forecasters currently see a 40% chance of La Niña developing by the thirdquarter, rising to 50% by the fourth quarter. Past La Niña events have onaverage made the summers hotter and the winters milder than usual, analystswith Bank of America Merrill Lynch said in a March 31 note.

Spot gas trades biased loweras cold retreats

Inday-ahead trade, most markets were softened as the early spring blast ofwinter-like cold drifts out of major heat-consuming regions.

Northeastmarkets corrected to the downside as the cold air vacates the region andsoftens demand. Algonquin Citygates shed more than $1.20 to drive the index toaround $4.55. A loss of about 25 cents at Iroquois-Waddington sent the indexthere to around $2.40. At the Transco Zone 6 NY hub a loss of a little morethan 1 cent held the index below $2/MMBtu, while Tetco-M3 traded down anaverage of about 20 cents to an index around $1.55.

Lackingweather for support and with losses in natural gas futures, Henry Hub spotvalues were down about 5 cents to an index around $1.90. The market at nearbyhubs averaged below the Henry Hub, with indexes below $1.85 at Col GulfMainline and better than $1.85 at FGT Zone 3. The Chicago hub index bested theHenry Hub by about 5 cents as the market drifted about 5 cents lower on the day.

Buckingthe downside, as heat provided demand and price support, deals at the Waha hubin Texas were about 1 cent higher to an index atop $1.75. CIG added nearly 5cents to an index near $1.60 and SoCal Border trades were higher by a similaramount to an index near $1.80.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.