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May natural gas reverses rally, sinks ahead of weekend

NYMEX May natural gas futures were lower Friday, April 7, in profit taking and amid expectations of demand erosion as weather warms across the U.S. The contract settled 7.0 cents lower at $3.261/MMBtu, after trading a range from $3.254/MMBtu to $3.340/MMBtu.

"Sellers took control after buyers failed to fuel a follow-through rally, following Thursday's strong surge," FX Empire analyst James Hyerczyk said.

May natural gas futures settled the April 6 session 6.5 cents higher at $3.331/MMBtu with support from a downside miss in the natural gas inventory report as the EIA outlined a 2-Bcf build to stocks against a consensus estimate that called for a 9-Bcf injection.

Sellers looked beyond the downside miss in the weekly storage report and focused instead on the injection's comparison to a 13-Bcf five-year-average storage pull, with the total working gas supply closing out the titular withdrawal season at 2,051 Bcf, 427 Bcf below the year ago level, but 265 Bcf above the five-year average storage level of 1,786 Bcf.

Weather forecasts provided additional downside pressure as the latest revisions to six- to 10-day and eight- to 14-day projections show above-average temperatures engulfing the bulk of the U.S.

In the near term, a portion of Maine will see average temperatures, while a swath of average temperatures separates the dominating above-average temperatures in the eastern two third of the country, from below-average temperatures in the West.

In the longer term, a portion of the Northeast and the West will see a mix of average and below-average temperatures, while the majority of the eastern two thirds of the county will continue under above-average readings.

"There has been some market talk regarding the extent to which warmer temperature represent increased cooling demand from the power sector versus a reduction in late season heating demand, but in April the impact on heating demand still tends to be greater," Citi Futures analyst Tim Evans said.

The erosion of heating demand ahead of a substantial boost in cooling load should allow the natural gas supply to continue building through the shoulder season.

Trades for product delivered Saturday through Monday at major hubs across the country came under pressure from demand erosion, as weekend inclusion combined with milder weather to deflate expectations.

A more than 25-cent loss at Transco Zone 6 NY brought the index there to near $2.90 while Tetco-M3 traded nearly 20 cents lower to an index near $2.95. At the Henry Hub, a loss of nearly 5 cents brought the index below $3.20 while Waha shed more than 5 cents to around $2.80 and Chicago fell similarly to an index near $3.05. At the SoCal Border a loss of more than 5 cents brought the index to around $2.85 while PG&E Gate bucked the wider trend, managing a nearly 1-cent gain to an index atop $3.35.

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.