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May natural gas sinks into expiration as demand erosion expected

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


May natural gas sinks into expiration as demand erosion expected

May naturalgas futures rolled off the board at the close of business Wednesday, April 27, havingshed additional value, as the market considers limited demand expected to be generatedby weather as the shoulder season marches on. Relinquishing another 3.7 cents, Mayfutures settled and expired at $1.995/MMBtu. June natural gas settled the midweeksession with a modest loss of 0.6 cent at $2.153/MMBtu.

Headingdeeper into the shoulder season, demand is expected to retreat further and anchorthe market to the downside as natural gas inventories begin to build at a ramped-uprate after a slow start to the injection season due to stubborn cold in major heat-consumingregions.

Whilethe latest weather outlooks show additional weeks where below-average temperatureswill dominate in key heat-consuming regions, the calendar suggests higher low temperaturesthat should still limit the amount of natural gas needed for space heating. At thesame time, staving off hotter weather, the limited demand for cooling will keepadditional pressure on the markets.

The six-to 10-day outlook from the National Oceanic and Atmospheric Administration showsbelow-average temperatures spanning from the Northeast across the Mid-Atlantic,majority of the Southeast, the entire Gulf region and portions of the central U.S.Average temperatures will hold portions of Maine and Florida and stretch acrossa portion of the central U.S. into portions of the Rockies, while a portion of Florida,the north-central U.S., and the West will see above-average temperatures.

The coldair vacates the Northeast and portions of the Mid-Atlantic but maintains a gripon the Southeast, Gulf and portions of the south-central and Southwest in the eight-to 14-day period, further deflating any remaining bullish sentiment generated byexpectations for lingering demand. Average temperatures will grip south Floridaand span from portions of the Northeast into portions of the Mid-Atlantic, centraland Southwest. Above-average temperatures will overtake a portion of the Northeast,the north-central U.S. and the majority of the West.

Lacklusterdemand should begin to drive larger storage injections after a slow start to theinjection season. After a 7-Bcf injection reported for the week to April 15, theU.S. Energy Information Administration is expected to report the first double-digitinjection of the season when it releases its latest data at 10:30 a.m. ET on Thursday,April 28.

The of last week wasabove expectations but fell well below the five-year-average injection of 45 Bcfand the previous year's addition of 82 Bcf. Still the figure brought the total workinggas supply to 2,484 Bcf, some 881 Bcf above the year-ago level and 811 Bcf abovethe five-year average storage level of 1,673 Bcf.

Thisweek's survey of analystsand traders leading up to the release of data covering the week to April 22 suggestsa build ranged from 62 Bcf to 81 Bcf, with a consensus formed at a 70 Bcf build,much improved on the week and better than the five-year-average build of 52 Bcfbut below the year-ago injection of 84 Bcf. Natural gas inventories will climb to2,554 Bcf while the surplus to the year-ago level will shrink to 867 Bcf and theyear-on-five-year-average surplus will rise to 829 Bcf.

Spotgas markets varied in price direction for deals done at key hubs across the countryas a mix of higher and lower demand projections supported both modest gains andmoderate losses.

Transactionsat Northeast delivery locations were done at higher values as the region shouldsee lingering heating demand as temperatures look to reach only to highs in theupper 50s in major markets, including Boston and New York. Trades at the CanadianBorder were higher by more than 1 cent as Iroquois-Waddington found an average atop$2.20. At Transco Zone 6 NY, trades averaged near $1.50 gaining about 5 cents, whileTETCO-M3 moved more than 1 cent higher to around $1.40.

HenryHub action was goosed less than 1 cent higher to an index below $1.90 amid ongoingwarm weather, while heat in Texas promoted a gain of more than 1 cent at Waha toan index near $1.80. Chicago gained about 1 cent to an index below $1.95, whileCIG gained more than 5 cents to an index atop $1.70. Across the West, SoCal Borderdeals averaged below $1.80 with a gain of more than 1 cent, PG&E Gate buckedthe more dominate uptick to slip more than 1 cent to an index below $2.04, and Malintraded about 1 cent higher to an average around $1.75.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed 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 Storage data,go to our NaturalGas Storage Page.