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April natural gas extends losses to below $2.60/MMBtu ahead of weekend

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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 extends losses to below $2.60/MMBtu ahead of weekend

April natural gas futures extended losses Friday, March 23, lacking fundamental support to move higher. The contract slipped to a $2.579/MMBtu low before settling the week's closing session 2.6 cents lower at $2.591/MMBtu.

Weather outlooks imply that, despite maintaining a grip on the majority of the U.S. beyond the official start of spring, winter-like temperatures will soon depart, leaving behind milder weather that should erase late-season heating demand ahead of an increase in cooling load.

Updated National Weather Service forecast maps show below-average temperatures holding over portions of the Rockies and a large area of the central U.S. in the six- to 10-day period then expanding into the bulk of the country's eastern two-thirds in the eight- to 14-day period. Average to above-average temperatures will initially envelop nearly the entire eastern U.S., most of the Gulf Coast and much of the West, but will become contained to parts of the Southeast, fringes of the Gulf Coast and most of the West further out.

In the longer range, The Weather Company sees warmer-than-normal weather over the southern tier of the U.S. from April through June, while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country over the same period.

Lingering cold weather in the week to March 14 supported an 86-Bcf drawdown from natural gas inventories for the week to March 16 that took the total working gas supply to 1,446 Bcf. While comparisons to the consensus outlook calling for a 90-Bcf withdrawal and the year-ago 137-Bcf pull were bearish, the figure bested the 53-Bcf five-year average withdrawal and widened the deficit to the closely watched five-year average to 329 Bcf.

The EIA revised lower its end-of-withdrawal-season inventory estimate to 1,373 Bcf by March 31, or 19% lower than the five-year average, assuming storage draws match the five-year average for the remainder of the season.

Looking beyond the recent cold and end-of-season supply estimates, the market is responding instead to the anticipated switch from storage withdrawals to injections as consumption data reflects the moderating weather.

The latest "Natural Gas Weekly Update" for the week to March 21, much of which will be reflected in the forthcoming inventory data, shows total U.S. gas consumption 5% lower week on week at 76.6 Bcf/d.

In addition to a decline in demand, the EIA reported dry production up 1% at 79.1 Bcf/d week on week. With the Baker Hughes rig count for the week to March 23 outlining a jump of five rigs on the weekly period, the combined demand erosion and anticipated production gains should drive the natural gas supply back higher ahead of the next peak demand period.

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.