Natural gas prices
reduce declines, down 0.5% at $1.63/mmBtu after EIA says gas-in-storage rose by
85B cubic feet last week,
which precisely matches
the average of forecasts by analysts in a WSJ survey. The number is well below
last year’s 111-bcf injection,
and also slightly below
the five-year-average rise of 87 bcf, and analysts say that’s because
hotter-than-normal
temperatures last week
in places like Texas gave a pre-summer boost to demand.
Total storage now
stands at 2.892T cubic feet, which is a 17% surplus to the five-year-average
and compares to a 19% surplus two weeks ago
Storage Summary
Working gas in storage was 2,892 Bcf as of
Friday, June 12, 2020, according to EIA estimates. This represents a net
increase of 85 Bcf from the previous week.
Stocks were 722 Bcf higher than last year
at this time and 419 Bcf above the five-year average of 2,473 Bcf. At 2,892
Bcf, total working gas is within the five-year historical range.
Natural gas prices are
moving lower in NY, down 3.3 cents at $1.697/mmBtu in conjunction with broader
declines in crude oil and US equity futures amid fears of a resurgence of the
coronavirus in the US and China.
Natural gas investors
are tracking weather patterns to see whether late June and into July may
provide hotter-than-normal temperatures that could boost gas-fired electricity
grid demand.
The market has
overlooked the moderately bullish weekly EIA storage report late last week that
showed a slightly-below-normal injection of 93B cubic feet,
which helped bring the
storage surplus down to 18% above the average vs 19% the previous week.
Natural gas prices
decline 7 cents to $1.78/mmBtu as investors worry mostly-mild spring weather
and coronavirus-related factory shutdowns will keep demand muted.
“This market has
been looking for some bullish assistance from the weather factor and although
weekend updates are still favoring above normal trends across most of the US,
deviations from normal
don’t appear sufficient to spur much buying interest,” say analysts at
Ritterbusch & Associates.
The analysts say prices
could find some support later in the week if an EIA storage report turns out
bullish,
but they say sustained
price-gains probably won’t happen unless the upcoming summer brings
hotter-than-normal temperatures that could support electricity grid demand for
cooling.
Natural Gas Erases Gains,
Falls 5 cents to $1.77 Amid Broader Declines in Stock Markets and Oil
Natural gas prices dropped nearly 3% on Friday as inventories
built more than expected. Strong production despite continued declines in rig
count,
has kept natural gas prices on their heels. The weather is
expected to remain warmer than normal for most of the United States which
should increase cooling demand.
Softer than expected Durable goods order likely reduced natural
gas demand. Orders for durable goods, plunged 17.2% in April after dropping
16.6% in March.
Technical Analysis
Natural gas prices dropped on Thursday declining nearly 3% but
bouncing near support which is an upward sloping trend line that comes in near
1.82.
A close below this level would likely see a decline to the June
contract lows at 1.60. Resistance on natural gas is seen near the 10-day moving
average of 1.89.
The 10-day moving average recently crossed below the 50-day
moving average which means that a short term downtrend is now in place.
Short term momentum is negative as the fast stochastic generated
a crossover sell signal. The current reading of the fast stochastic is 5, well
below the oversold trigger level of 20 which could foreshadow a correction.
Natural gas prices
decline 2 cents to $1.77/mmBtu, dragged lower by a fall in oil prices and as
investors shift their bets into next month’s contract,
since the June delivery
contract expires this afternoon. Gas prices have been relatively range-bound in
May,
down 8% from the
beginning of the month amid continued uncertainty over just how much of an
impact coronavirus is having in terms of both supply and demand.
The drop in natural gas
demand due to lockdowns hasn’t been extreme compared to crude oil,
but gas production
doesn’t appear to be falling significantly, either.
Analysts say mild
spring weather will weigh on prices in the absence of other market-moving news.
Natural gas prices rise
further, up 4 cents at $1.86/mmBtu after hitting a nearly two-week-high
on Tuesday,
as risk appetite
improves across much of the energy/commodity space due largely to a
better-than-expected rebound in demand as coronavirus lockdowns are lifted.
“The gas trade has
put in a good performance on the upside during the past couple of sessions as
the gas curve has strengthened further,” say analysts at Ritterbusch &
Associates.
“The fact that the
market continues to hang out near 10-day highs suggests some upside follow
through in today’s trade and
possibly tomorrow if
the weekly storage data offers a smaller seasonal injection than generally
expected.”
Natural
gas prices surge 18 cents to $1.83/mmBtu as data point to a decline in US gas
output.
Analysts
at Houston-based Tudor Pickering say US gas flows stood at 88.1B cubic feet per
day on Sunday, “down from 90.2bcfd on Friday,
with
the Northeast accounting for 1.4bcfd, followed by Texas flows down
0.4bcfd.” The analysts caution, however,
that
the decline may not last, especially as oil prices push above $30/bbl as this
could lead oil and gas producers to get the commodities flowing again.
Additionally,
they note weekly EIA storage this week may show another triple-digit rise as
LNG demand takes a hit.
With weather-driven demand
expected to decline on warming temperatures later this week, and with
inventories expected to fill quickly in the weeks ahead,
natural gas futures were down
in early trading Tuesday.
The June Nymex contract was
off 4.5 cents to $1.781/MMBtu and are on target for
their lowest closing price in more than two weeks as investors see increasing
signs the commodity is starting to feel a delayed impact from coronavirus.
“The US natural gas market has become the latest victim of
the coronavirus,” Price Futures’ Phil Flynn writes in a column for Fox
Business.
“The
shutdown of economies in Europe and Asia reduced the demand for natural gas.” Natural gas in storage in the US is at a 21% surplus to the five-year
average,
and analysts say
that could increase as the low-demand spring season progresses.
Against a backdrop of coronavirus-related demand destruction, expectations for milder weather later this month continued to keep the pressure on natural gas futures prices early Wednesday.
The May Nymex contract was down about 2.4 cents to
$1.626/MMBtu at around 8:30 a.m. ET.
Over the past few days models have been consistent in
showing moderating temperatures later this month following a stretch of
colder-than-normal temperatures this week, according to Bespoke Weather
Services.
“The overall theme continues to be for a tame, near-normal
demand period after April 20, likely lasting through the end of the month,”
Bespoke said.
Meanwhile, the market is in need of something that can
tighten the supply/demand balance “in order to get any rally going at the front
of the curve,” the firm said, pointing to recent Energy Information
Administration (EIA) storage reports that have been “very loose.”
“It looks like we are headed for another loose number
tomorrow, as demand destruction continues due to the economic shut-downs,”
Bespoke said. “There is talk of some partial re-opening of things in a few
weeks, but it is unclear if that will actually occur or not.”
After Tuesday’s sell-off, the prompt-month contract could
establish a new low for the year by the end of the week, according to analysts
at EBW Analytics Group. Tuesday’s selling was attributed in part to “a move out
of energy commodities,” they said.
“Nymex crude nosedived, with the front-month contract
re-testing support at $20/bbl. The May-July natural gas contracts followed
crude lower, with asset allocation managers looking to move funds to sectors
poised to earn more attractive returns,” the EBW analysts said.
But the demand outlook for natural gas likely played an even
bigger role in the sell-off, they said.
Analysts pointed to a “growing recognition that once the
current round of cold weather ends, demand for natural gas is likely to
plummet, with the potential for the first triple-digit injection of the year”
during the last week of April. “After yesterday’s sell-off, bulls are unlikely
to return to the natural gas market soon, opening the door to significant
further price declines over the next few weeks.”
As of early Wednesday, a Bloomberg survey was showing a
median expectation for a 65 Bcf injection for this week’s EIA storage report,
with predictions ranging from 42 Bcf to 78 Bcf.
Last year EIA recorded a 73 Bcf build for the similar week,
and the five-year average is a build of 27 Bcf.
May crude oil futures were down 44 cents to $19.67/bbl at
around 8:30 a.m. ET, while May RBOB gasoline was trading fractionally higher at
around 72.9 cents/gal.
