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April natural gas surges into expiration as May contract tops $2.70/MMBtu

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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


April natural gas surges into expiration as May contract tops $2.70/MMBtu

April natural gas futures expired at the close of business Tuesday, March 27, adding 7.3 cents at $2.691/MMBtu as lingering weather-related demand support and a depleted natural gas inventory stoked gains. May futures will take the lead position on the offensive, adding 5.7 cents to settle Tuesday at $2.714/MMBtu.

The U.S. Energy Information Administration expects an end-of-season natural gas supply of 1,373 Bcf, which would be 19% below the five-year average if weekly inventory withdrawals match the five-year average for the remaining weeks to March 31.

After an 86-Bcf withdrawal from the working gas supply for the week to March 16 that was below market expectations and the five-year average but well above the prior-year pull, the total working gas supply sits at 1,446 Bcf.

Inventories could erode by about 68 Bcf to 71 Bcf in the week to March 23, compared with the 46-Bcf five-year average pull and the 58-Bcf drawdown reported for the same week in 2017. Stocks could slip by an additional 29 Bcf in the week to March 30, compared with a 28-Bcf five-year average and the 4-Bcf pull reported the same week a year earlier, according to analysts' early expectations.

Weather supports the storage projections. The National Weather Service outlooks show below-average temperatures enveloping the Northeast, mid-Atlantic, Midwest, the upper portions of the South and parts of the Northwest through the upcoming six- to 10-day and eight- to 14-day periods as average to above-average temperatures settle over the balance of the South and most of the West.

Minimizing gains for May futures, the anticipated arrival of spring weather will bring demand erosion and the onset of inventory rebuilding. The Weather Company sees warmer-than-normal temperatures over the southern tier of the U.S. in April through June, while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country in the same period.

Natural gas production growth expectations also will keep downside pressure on the markets. A rig count gain of five in the week to March 23 brought the U.S. oil and gas total to 995, with four oil rigs and one gas rig added during the weeklong period. Barclays analysts forecast natural gas production to grow 7 Bcf/d this summer compared with the previous summer to 79.5 Bcf/d.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities pages.