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May natural gas on the defensive heading toward expiration

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 on the defensive heading toward expiration

May naturalgas futures moved lower Tuesday, April 26, with options expiring at the settle andthe contract under pressure heading toward its roll off the board at the close ofbusiness Wednesday, April 27. Moderating weather against a backdrop of a healthynatural gas supply provided pressure to sink the contract to a $1.993/MMBtu lowbefore a bounce reversed some losses to a settle at $2.032/MMBtu.

Naturalgas inventories are central to the market's continued downside response to ralliesand the market's efforts to recover steadily back above $2/MMBtu. The market isoversupplied with 2,484 Bcf in inventories after a 7-Bcf injection reported forthe week to April 15. Stocks are 881 Bcf above the year-ago level and 811 Bcf abovethe five-year average storage level of 1,673 Bcf.

Thislevel of supply at the onset of the shoulder season, when a tapering off of demandshould send more natural gas production underground due to a lack for either coolingor heating, provides a strong impetus for prices to move lower.

Weatherforecasts support the lower demand expectations as the six- to 10-day projectionfrom the National Oceanic and Atmospheric Administration shows average and above-averagetemperatures in the eastern U.S., average and below-average temperatures acrossmuch of the central U.S. and above-average temperatures across portions of the north-centraland West.

The eight-to 14-day outlook supports lower demand outlooks with its forecast for above-averagetemperatures in the majority of the Northeast, across the north-central U.S. andmuch of the West, average temperatures for portions of the Mid-Atlantic, Midwest,central and Southwest and below-average temperatures across portions of the Mid-Atlantic,Southeast and south-central regions.

Amidthe lower demand, and with a stalled but still healthy amount of natural gas production,natural gas inventories are expected to increase the pace of storage building aftera slow start to the season with the first injection reported for the week to April15.

For theweek to April 22, analysts and traders are looking for a double-digit injectionlikely between the five-year-average injection of 52 Bcf and the year-ago buildof 84 Bcf.

Asidefrom modest gains at a few Northeast locations, the next-day market for naturalgas was lower Tuesday, as weather points to demand erosion midweek.

At themajor Northeast locations, natural gas for Wednesday flow traded at lower pricesamid warming that should eliminate lingering heating demand, resulting from themost recent blast of cooler air. Iroquois-Waddington traded down more than 1 centto an index below $2.20, TETCO-M3 gave back a similar amount to an index near $1.40and Transco Zone 6 NY traded about 10 cents lower to an index near par with TETCO-M3around $1.40.

A lossof about 10 cents at the benchmark Henry Hub drove the index below $1.90, signalingsimilar losses at other regional delivery hubs for the Wednesday product. Waha tradesshed about 10 cents to an index around $1.75. Chicago's average, near par with theHenry Hub, came with a loss of about 5 cents. CIG deals were nearly 10 cents lowerto an index near $1.65. In the West, SoCal Border trades were down nearly 15 centsto an index near $1.75, PG&E Gate fell more than 1 cent to an index around $2.05and Malin gave back about 10 cents to an average near $1.70.

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.