After losing ground in the previous session, natural gas futures clawed back a few cents in early trading Wednesday even as analysts continued to see downside risks for prices on weak near-term fundamentals. The April Nymex contract was up 2.5 cents to $2.533/MMBtu at around 8:50 a.m. ET.
Forecasts early Wednesday showed a slight increase in projected weather-driven demand compared to Tuesday, according to Bespoke Weather Services. However, expected demand remained “quite low” overall.
“We suspect that price action remains choppy centered around this low $2.50s zone in prompt month, at least until” the U.S. Energy Information Administration (EIA) publishes its weekly storage report on Thursday, Bespoke said. “Given the weakness that remains in terms of the supply/demand balance, we can see risk ultimately toward lower prices, but the market has been unwilling to accept a move under $2.50 so far, so we must be respectful of that price action for now.”
Still, with the market facing a “weak demand picture in the foreseeable future,” an EIA report showing continued looseness in the supply/demand balance or data pointing to weak balances could increase the chance that prices break below current levels, according to the firm.
The natural gas market “ran out of buyers” Tuesday amid “extremely weak” near-term supply/demand fundamentals, according to analysts at EBW Analytics Group. This triggered “a significant sell-off” that saw the April contract drop towards the $2.50 level and left the January 2021 contract just under $3.000.
Early in yesterday’s session “there were no bidders willing to step in and drive the April contract above Monday’s $2.582 close,” the EBW analysts said. “Absent new buyers, prices started to sink and fell steadily for most of the day before finding support” around $2.500.
“Trading today is likely to center around positioning ahead of tomorrow’s storage report,” they said. “With little likelihood of a large draw and an injection likely next week, it would not be surprising if the April contract lost ground again today.”
NGI modeled a 17 Bcf withdrawal for the upcoming EIA report, which covers the week ended March 19. That would compare with a 26 Bcf pull in the year-ago period and a five-year average withdrawal of 51 Bcf.
The median of eight estimates submitted to Bloomberg as of early Wednesday showed a withdrawal of 21 Bcf. Responses ranged from withdrawals of 14 Bcf to 33 Bcf.
May crude oil futures were up $1.49 to $59.25/bbl at around 8:50 a.m. ET, while April RBOB gasoline was up about 3.1 cents to $1.9275/gal.
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March 24, 2021 at 08:08PM
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Natural Gas Futures Recover Early, Though Near-Term Fundamentals Said 'Extremely Weak' - Natural Gas Intelligence
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