Natural gas futures on Monday hovered in a narrow range of gains and losses as traders weighed outlooks for mild spring weather and its dampening effect on domestic demand against a recovery in liquefied natural gas (LNG) levels.
The April Nymex contract ultimately settled at $2.777/MMBtu, up six-tenths of a cent day/day, supported by strength in cash markets. May advanced nine-tenths of a cent to $2.818.
Chilly near-term conditions propped up spot gas prices. NGI’s Spot Gas National Avg. gained 32.0 cents to $2.965.
LNG feed gas volumes climbed above 10 Bcf early on Monday, marking substantial progress in the recovery from declines imposed by the deep freeze in Texas that crippled the Gulf Coast energy sector for days.
“Delayed demand” from those interruptions is hitting the market, analysts at the Schork Report said Monday.
LNG export levels had hung between 8 Bcf and 10 Bcf last week after plunging below 4 Bcf during the week ended Feb. 19, when the severe Arctic cold snap that reached deep into Texas wreaked havoc and dramatically cut into LNG activity.
LNG volumes, prior to the Texas cold snap, had topped 11 Bcf on several days over the span of weeks as U.S. exporters met robust demand from Asia and parts of Europe during the peak of winter.
Bespoke Weather Services noted the renewed LNG momentum as a key positive. But the firm said futures in March would need some help on the weather front to drive another round of heating demand before spring conditions settle in for good.
While the week ahead is expected to generate some demand increases, the forecaster said, the mid-range outlook is notably bearish.
“Weekend weather models moved to the cooler side,” Bespoke sad, “leading to a cooler outlook over the next week or so in the eastern U.S. This bumps forecast demand up to normal levels late this week and into the weekend, but only serves to delay the inevitable bigger warming that is on the way next week, when demand falls to very low levels relative to seasonal norms.”
The firm said the first half of March, overall, is projected to be warmer than normal – compared with both the five-year average and long-term historical averages.
“Moving forward, there can be some variability mixing in at times, as we are seeing this week, but we feel the overall warmer state holds as we move into the back half of the month as well,” Bespoke said. “It remains a low-demand forecast…and the fundamental picture, for now, is rather weak.”
EBW Analytics Group delivered a similarly dour outlook on Monday.
“There are few positive catalysts in sight,” the EBW analysts said. “It is still possible that the forecast for the second half of March will shift cooler. Unless and until it does, however, natural gas futures are more likely to trend lower.”
The decline in futures Monday followed several days of declines last week as weather warmed and production recovered from the winter blast that enveloped Texas.
Recovery Ahead
The EBW analysts noted new estimates for the financial toll of the weather disaster in Texas.
“Estimates put the increase in wholesale power costs during the crisis at $50-52 billion,” the analysts said. “The total economic loss to the state, however, including lost revenues for businesses and emergency expenditures, is estimated at $128 billion.”
Meanwhile, Texas and the U.S. energy sector more broadly would benefit from sustained economic momentum in 2021. Robust activity could fuel higher gas demand from the commercial and industrial corners of the market. Hopes are running high for vaccines to bring an end to the coronavirus pandemic this year, opening a path for new economic vigor.
In the meantime, analysts are watching closely to see if a new $1.9 trillion pandemic relief bill championed by President Biden wins approval. The bill calls for aid to small businesses, direct payments to American households and funding to hasten vaccine rollout programs. Biden has touted it as a vital bridge from the virus breakouts this winter to a stronger, more normalized economy later this year. The bill passed the House last week and will be debated next in the Senate.
Brian Gardner, chief Washington policy analyst at Stifel Financial Corp., said the legislation looks to have the necessary support to pass the upper chamber as well. “Assuming there are no major surprises in the Senate — significant reductions in the size of the bill — we expect the bill will be finalized in the next two weeks,” he said Monday.
Cash Climbs
Spot gas prices climbed on Monday across the Lower 48 along with cooler temperatures over parts of the nation’s midsection and in the East.
NatGasWeather said the bump in national demand was expected to continue through Tuesday, “as a weather system impacts Texas and the southern Plains with showers, while a colder system sweeps across the Great Lakes, Ohio Valley and Northeast with lows of 0s to 30s.”
Prices in the volatile Northeast led the charge on Monday. Algonquin Citygate spiked $3.085 day/day to $6.470, while PNGTS jumped $2.295 to $6.400 and Dracut surged $2.545 to $6.500.
Elsewhere, prices generally advanced by a few cents.
In the Midwest, Dawn climbed 5.0 cents to $2.645, and in Texas, Waha rose 5.0 cents to $2.470.
Out West, SoCal Citygate proved an exception, advancing 30.0 cents to $3.245.
Demand could prove choppy the remainder of the week.
“After a mild break Wednesday over much of the U.S. with highs of 50s to 70s, another weather system will push into the East late in the week,” NatGasWeather said.
However, the firm added, next week “the pattern becomes quite bearish as upper high pressure stretches from Texas to the Northeast with comfortable highs of 50s to 80s…There’s potential for colder weather systems to return to the northern and central U.S. March 13-15, but far from convincing and with more evidence needed.”
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March 02, 2021 at 06:13AM
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April Natural Gas Futures Eke Out Gain on Tail of Strong Cash Prices - Natural Gas Intelligence
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