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March warming outlook drives natural gas futures down; Silver mixed ahead of other winter storms

After an earlier bounce, natural gas futures finally slid further on Friday as traders focused on some easing in the early March cold. With potential impacts to already lower than normal storage inventories unclear, the March Nymex contract settled at $4.431/MMBtu, down 5.5 cents on the day. Avril lost 5.3 cents to hit $4.377.

In short :

  • Less cold seen for early March
  • Volatility set to continue
  • ‘West and East Coast Gas Rally

Spot gas – which traded Friday for gas delivery through Tuesday – was generally lower, although strong demand on the west and east coasts supported prices there. NGI’s Spot Gas National Avg. fell 2.5 cents to $4,830.

After some extremely cold moves this week in the weather models, the latest forecasts have eased up a bit for the early March period. The changes were minor early Friday, with the next two weeks still expected to be colder than normal.

Bespoke Weather Services said the coldest days in the forecast come late in the coming week until next weekend, when daily gas-weighted degree days rise above 30 before falling into the following week. . The pattern continues to favor colder than normal weather beyond day 15, although not extreme, although some variability may return after the first third of March. Any weakening of the Pacific pattern opens the door to warmer days, the forecaster said, with no help from the Atlantic side to drive the current colder pattern.

NatGasWeather said the Global Midday Forecast System continued to reduce the amount of cold from March 1-5. The model has lost a total of 13 heating degree days in the previous 24 hours and is no longer cold enough to be satisfied.

Still, the possibility of the cold lingering a bit longer has weighed on traders still digesting the latest government inventory data. The March Nymex contract hit an intraday high of $4.654, up 16.8 cents higher than Thursday’s close.

The Energy Information Administration (EIA) said inventories for the week ending Feb. 11 were down 190 billion cubic feet to 1,911 billion cubic feet.

The Schork Group pointed out that this was the sixth consecutive triple-digit draw of the winter, resulting in a “substantial” delivery of 1.28 Tcf. This is the first time stocks have fallen below 2 Tcf in the past three winters, analysts said.

“We are over two-thirds through the season, and the market has now delivered over 90% of last summer’s 1,894 Tcf recharge,” the Schork team said. Including Thursday’s EIA update, “this season’s delivery is 180 billion cubic feet above the five-year average, 254 billion cubic feet above the seasonally adjusted standard and 56 billion cubic feet above last year’s pace.”

Looking ahead to the last week of February, Mobius Risk Group said the market needs to tackle measuring recent highs and lows in $1 increments. Such volatility has been largely absent from futures trading for the past five years.

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

“With the March contract expiring ‘in four trading days’ and the start of bid week, market participants will remain nervous as the ghosts of last month’s expiration linger.”

The February Nymex contract jumped 46% on expiry day, hitting $6.265.

Further down the road, Mobius said daily production in the first half of the injection season is a critical factor for physical market players with open exposure, as well as financial players who have remained at the gap since volatility spiked in early fall.

In recent months, there has been a wide range of production growth estimates, some as low as 1 Bcf/d yr/yr and others as high as 4 Bcf/d, according to Mobius, based in Houston. The company pointed out that advice from EQT Corp., Comstock Resources Inc. and Antero Resources Corp. best support total US production growth at the lower end of the market’s expected earnings range; however, “there are still many uncertainties regarding the growth of the Permian Basin in an environment of $80-90 per barrel.”

EBW Analytics Group noted recent comments from Pioneer Natural Resources Co. CEO Scott Sheffield reaffirming the company’s commitment not to increase supply by more than 5% in 2022.

In a capital restriction proclamation, Sheffield said that even if oil prices hit $200, Pioneer would not change its growth plans.

“In our view, Sheffield’s comments may be representative of the capital restriction of public independents, but supermajors and smaller private companies continue to have plans for rapid expansion of production to capitalize on soaring prices for raw materials.”

Cash softens ahead of the long weekend

Spot gasoline prices fell across most of the country on Friday following a severe winter storm that brought heavy rains and strong winds. With rising temperatures, the majority of locations in the United States fell a penny to 30.0 cents.

In Texas, Houston Ship Channel fell 21.0 cents to $4,180 for four-day gas delivery, while Waha fell 22.0 cents to $3,960.

In the country’s midsection, Consumers Energy slipped 5.5 cents to $4,415, and Enable East fell 9.5 cents to $4,150.

Prices across Louisiana, the Southeast and Appalachia mostly fell by less than 20.0 cents a day.

However, on the East Coast, Algonquin Citygate jumped $1,500 to $9,665 on average for gas delivery through Tuesday. Similar gains have been seen across New England.

The National Weather Service (NWS) said that although the strong winter storm that has hit the region in recent days has moved seaward, gusty winds and lower temperatures have remained. However, a warm-up is expected in the coming days.

Meanwhile, an upper trough is expected to dip south across the northwestern United States Saturday through Sunday, according to the NWS. Snow was seen breaking out in the northern Rockies and high plains as an arctic front moved south in the north-central states. Temperatures are also expected to drop in Montana, from low to mid-50s in eastern Montana on Saturday to below zero Sunday afternoon. Freezing temperatures are expected to return to the northern High Plains and upper Midwest in the coming days.

Given the freezing weather, spot gas CIG climbed 13.0 cents to $4.475, and KRGT Del Pool rose 11.0 cents to $4.575. Malin rose 16.5 cents to $4.485.