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April natural gas nudged higher by lingering demand support

April natural gas futures on the New York Mercantile Exchange moved higher Tuesday, March 20, as recent and lingering cold should keep natural gas inventories receding despite the start of spring. The contract ended a seesaw session that saw a $2.650/MMBtu low and $2.695/MMBtu high, up 2.4 cents at $2.675/MMBtu.

Cold weather supported demand for natural gas in the week to March 14, much of which will be included in the next inventory report from the U.S. Energy Information Administration due out at 10:30 a.m. ET on Thursday, March 22, covering the week to March 16.

Colder weather in many parts of the Lower 48 in the week ended March 14 supported a 9% week on week increase in residential and commercial sector consumption, helping total consumption rise 5% on the week, the EIA said in its latest weekly update.

The lingering demand for heating is driving the latest expectations for a natural gas inventory withdrawal spanning the upper 80s Bcf to the low 90s Bcf. A drawdown within the range of expectations would be near or below the 93-Bcf pull reported in the previous week and will compare with a 137-Bcf pull reported for the corresponding week in 2017 and a 53-Bcf five-year average draw.

Support for additional storage erosion comes as the latest weather maps from the National Weather Service support the possibility of lingering heating demand.

The six- to 10-day weather map shows below-average temperatures in the Northeast and a portion of the mid-Atlantic, as well in the West and across a portion of the north-central U.S. Average temperatures grip portion of the mid-Atlantic, Southeast, Midwest and central U.S. while portions of the Southeast, the Gulf and areas of the south-central U.S. should see above-average temperatures.

For the eight- to 14-day period, below-average temperatures are expected to grip a portion of the Northeast as well as portions of the central and West, while the majority of the eastern half of the country, along with the West Coast will see a mix of average and above-average temperatures.

With a close eye on the approaching end of the traditional withdrawal season on March 31, the EIA said if net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season, working gas stocks will total 1,406 Bcf by the end of March, which would be 17% lower than the five-year average.

Working gas stocks ended the 2013-14 heating season at 837 Bcf, which is the lowest reported level for that time since 2010.

While participants are eyeing the near-term weather support that could keep inventories eroding, varied longer-range forecasts still imply declining demand as spring temperatures take hold and limit the upside support in the midrange outlooks.

In its latest long-range weather outlook released March 20, The Weather Company said warmer-than-normal weather should grace the southern half of the United States, particularly Texas and the southern Rockies, from April through June, while below-average temperatures are expected in the northern Plains and Northwest.

The outlook varies from the April-through-June forecast from the National Oceanic and Atmospheric Administration that is projecting warmer-than-normal conditions for much of the country, with the exception of the Pacific Northwest and north-central U.S., which generally should see equal chances of below-average, normal or above-average temperatures through the three months.

Despite their differences, the higher low temperatures associated with spring should turn weekly storage withdrawals to injections as milder weather saps demand for heating ahead of a bump-up in cooling demand.

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.