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May natural gas extends losses as end-of-season inventory approaches record high

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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

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Essential Energy Insights - January 2021


May natural gas extends losses as end-of-season inventory approaches record high

Maynatural gas futures extended lower at midweek as participants view weather asan albatross through the shoulder season. The front-month contract sunk to a$1.897/MMBtu intraday low, but reversed some losses to finish Wednesday, April6, at $1.911/MMBtu, lower by 4.3 cents.

Asmild weather conditions erase demand, storage withdrawals should be haltedahead of any significant demand for cooling in the summer, and the natural gasinventory should remain more than adequate to keep downside pressure on values.

Thenatural gas supply is on track to post a new end-of-season record high when theU.S. Energy Information Administration releases it next storage report at 10:30a.m. ET on Thursday covering the last week of the titular withdrawal season.

Asurvey of analysts and traders leading up to the report's release outlines anet change for the week ended April 1 ranged from a 1-Bcf injection to as muchas a 15-Bcf build, with a consensus formed at an 8-Bcf injection into storagethat would compare against a five-year average withdrawal of 19 Bcf and the6-Bcf injection reported for the same week in 2015.

Thebuild will follow a net 25-Bcfwithdrawal from natural gas inventories in the Lower 48 during theweek ended March 25 that was slightly above consensus expectations and abovehistorical averages. The storage withdrawal compared against the five-yearaverage withdrawal of 22 Bcf and the year-ago pull of 10 Bcf, and brought totalU.S. working gas supply to 2,468 Bcf, or 1,002 Bcf above the year-ago level and843 Bcf above the five-year average storage level of 1,625 Bcf.

Theoverwhelmingly bearish signals from weather and storage are expected to heapdownside pressure on the markets until a substantial demand-side boost and adecline in production begin to return market balance.

The8-Bcf injection anticipated in this week's data would result in a total workinggas supply of 2,476 Bcf, slightly extending the year-over-year surplus to 1,004Bcf and widening the year-on-five-year average surplus to 870 Bcf.

Thelatest revisions to weather maps from the National Oceanic and AtmosphericAdministration show below-average temperatures continuing to hold a grip on themajority of the Northeast, Mid-Atlantic, portions of the central, Southeast andSouthwest in the six- to 10-day period, with the cold in the east providingsome lingering demand support.

Coldweather vacates the majority of the country in the eight- to 14-day projection,maintaining a grip on the Southwest while creeping further to the north, butwith average and above-average weather dominating across the bulk of thecountry erasing much of the remaining heating demand.

Next-day gas deals pressuredby weather

Day-aheadmarket values were predominantly lower Wednesday for Thursday flow with lossesdriven by moderating weather and lower demand.

Sharplosses were recorded at the Northeast delivery locations as the latest, andprobably last blast of winter-like weather vacates the region. Lower demandassociated with the warming pressured Algonquin Citygates deals more than $2.00in correction from prior runs to the upside, with the index pegged below $2.45.Iroquois-Waddington traded down about 30 cents to an average near $2.10. AtTransco Zone 6 NY an index below $1.85 was lower by about 15 cents on the day,while Tetco-M3 trades averaged around $1.60, bucking the wider regional andnear-nationwide retreat with a gain of about 1 cent on the session.

Lacklusterdemand and more losses in futures worked the Henry Hub spot gas price downabout 5 cents to around $1.85, while smaller losses at Col Gulf Mainline andFGT Zone 3 brought indexes close to the benchmark Henry Hub. A less than 1-centloss at the Waha hub held the index there beneath $1.80, Chicago hub valuesaveraged near $1.90 were lower by about 5 cents, while less-than-5-cent lossesat hubs across the West brought the SoCal Border and Malin indexes near $1.75,and PG&E Gate to an index near $1.90.

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.