Natural gas futures advanced Monday for a second consecutive session, boosted by continued robust levels of liquefied natural gas (LNG). The April Nymex contract settled at $2.582/MMBtu, up 4.7 cents per day. May gained 5.3 cents to $2.619.
NGI Point Gas National average rose 4.0 cents to $2,310, with prices rising in the Rocky Mountain region and a snowstorm to start the week.
LNG feedstock volumes held well above 11 billion cubic feet to start the week after approaching 12 billion cubic feet in trading last Friday. Export activity boosted the month fast on Friday by 5.4 cents and continued to contribute to market momentum on Monday.
Asian demand for US exports is holding up after a particularly cold winter, and European demand for US gas is on the rise after storage stocks have decreased there early 2021. As of mid-March, 361 TWh of natural gas was stored in the European Union, which is only a third of the region’s capacity, according to IGN data. This is almost 270 TWh below the level of the previous year.
However, domestic demand is in a precarious state, with weather forecasts calling for increasing heat and minimal heating needs the rest of this month and into April. Analysts said the weather backdrop has prevented any sustained rally this month and could challenge the current winning streak this week.
Bespoke Weather Services said the picture was as bleak “as it can get at this time of year”.
The weather “remains firmly on the bearish side of the spectrum,” the firm added on Monday. While projected temperatures for the rest of March remained virtually unchanged from previous expectations, “we are seeing more evidence supporting our view that April is also starting at least warm enough, a trend that is likely to continue at as we go.”
April’s heat will remain bearish for gas demand unless warmer-than-normal conditions “can only be concentrated” in the south, where there is potential for cooling degree days later in the month, depending on the firm. “That’s not the pattern we’re seeing, however, as it appears to be warm overall in most parts of the country,” Bespoke said. “We suspect the heat continues into the summer, although it only turns bullish in May.”
EBW Analytics Group agreed that the medium-term weather outlook for domestic demand is bearish. But the company said expected economic activity in the coming months amid widespread coronavirus inoculations could boost industrial demand, and long-term weather forecasts that show a hot summer ahead signal strong cooling needs. . EBW also expects production to decline given weak gas demand forecast for the spring.
“By the summer, the combination of record LNG feed gas demand, high industrial demand for natural gas, potential for hot weather, and likely lower production is expected to maintain a long-term bullish outlook” for futures contracts, EBW analysts said.
On the pandemic front, vaccine makers are rapidly ramping up production after a slow start, a development that should accelerate inoculation programs this spring. Production of the three vaccines currently approved for use in the United States is expected to reach 132 million doses in March, nearly triple the 48 million last month, according to Evercore ISI estimates.
With an end in sight to the virus outbreaks, Federal Reserve policymakers raised their estimate for gross domestic product (GDP) expansion in 2021. The Fed’s median projection for GDP growth rose from 4, 2% to 6.5%, reflecting the faster pace of vaccine production and new $1.9 trillion federal budget support legislation that, among other things, funds vaccination efforts and provides direct stimulus payments to the majority of American households.
The “fiscal support is massive and the increased availability of vaccines is a welcome surprise,” said Scott Brown, chief economist at Raymond James & Associates.
Looking ahead to Thursday’s Energy Information Administration (EIA) storage report, NGI’s model estimated a shrinkage of 17 billion cubic feet for the week ended March 19. Bespoke is looking for a draw of 26 billion cubic feet.
Even the lower of the two would look bullish from last week’s report. The EIA reported a drawdown of 11 billion cubic feet from storage for the week ended March 12 – below market expectations for a drawdown in the range of 16-22 billion cubic feet and well above the five-year average withdrawal of 59 billion cubic feet for the comparable week.
Spot gasoline prices rose Monday after a snowstorm blanketed parts of Mountain West on Sunday and early in the week Denver and Salt Lake City, UT, soaking up late winter blasts and freezing temperatures. AccuWeather forecasters said a second set of wintry conditions are expected later this week in the Rockies.
Elsewhere, rain showers and thunderstorms drenched parts of the Southern Plains on Monday, with Monday high temperatures ranging from the 40s to the 60s. Prices rose across Texas, with El Paso Permian up to 13.0 cents at $2.285 and wow ahead 14.0 cents to $2.285.
Several hubs in California also posted strong increases to help boost the national average. Average of SoCal borders. gained 18.5 cents to $2.545 and Southern Frontier, PG&E gained 12.5 cents to $2,400.
Looking ahead, most of the lower 48s are expected to enjoy comfortable temperatures the rest of the trading week, with southern US highs of 60-80, as well as above-average highs of 50 and 60 in the Great Lakes and the northeast, according to AccuWeather. .
“After holding up reasonably well over the weekend, weather-related demand is poised to decline significantly, leading to small net injections into storage on most days and putting downward pressure on spot price,” EBW analysts said.