It might be early, even by early spring standards, but the first gas storage injection for 2021 has likely occurred. And that’s not an Apr. 1 prank.
The US Energy Information Administration will release the natural gas storage report for the week ended Mar. 26 at 10:30 AM ET (14:30 GMT) today. The consensus among analysts tracked by Investing.com is for an injection of 21 bcf, or billion cubic feet.
That would compare with a draw of 25 bcf for the week to Mar. 19.
In the last spring season, the first gas injection occurred during the week to Apr. 3. For 2019, the first build happened in the week to Mar. 29.
And that was still early for some.
Houston-based gas risk consultancy Gelber & Associates said in a note to its clients on Wednesday:
“With an injection this early, dramatically different from the same time last year and the five-year average, we can see how mild the temperatures have really been, stymying weather-driven demand and weighing down gas prices.”
The front-month gas contract on New York Mercantile Exchange’s Henry Hub settled Wednesday’s trade at $2.608 per mmBtu, or million metric British thermal units.
Natural Gas Down 6% In March
While that represented a drop of just 1% on the day, for the month Henry Hub’s key contract lost 6% as trading concluded for March. For the first quarter, gas futures remained moderately positive, with a 2% gain.
But some were of the opinion that gas prices could rebound if April’s cold turned out to be chillier than exoected.
Said Scott Shelton, energy futures broker at ICAP in Durham, North Carolina:
“The issues holding back the US markets is a lack (of) weather, and poor data. But, perhaps, if we can get another stronger data point under our belts like last week, we can join the party with Europe.”
“Bottom line? I am still pretty bored with NG with a neutral bias, but I tend to think that the emerging picture for US NG skews the risk to the upside.”
Technicals Show Natural Gas A 'Strong Buy'
Shelton’s stance is backed by technical charts of natural gas that suggest there’s still some upside for the market.
In Thursday’s session, for instance, Investing.com’s Daily Technical Outlook called for a “Strong Buy” of Henry Hub’s spot contract.
Should the market extend its bullish trend, a three-tier Fibonacci resistance is forecast, first at $2.644, then $2.663 and later at $2.694.
In the event of a retreat, then a three-stage Fibonacci support is expected to form, first at $2.582, then $2.563 and later at $2.532.
Weather Suggests A Warm April But Anemic Gas Prices
Notwithstanding the technicals, most weather forecasts show temperatures likely to heat up in April.
Customary spring maintenance projects will also probably limit capacity at facilities for LNG, or liquefied natural gas, and eat into feed gas volumes.
Rising temperatures could also push much of the Lower 48 US States into a multi-week stretch of comfortable weather that minimizes both heating and cooling needs and dampens demand, naturalgasintel.com said in a report issued Wednesday.
Bespoke Weather Services said in the report:
“We remain in a generally lower-than-normal demand regime at a time of year when demand is normally lower anyway, making for quite a weak picture on the weather side of the equation.”
Without a turn in weather, the firm said, power burns would need to strengthen the next few weeks to support a rally in futures. “Absent that, it will take another bullish” surprise from Thursday’s storage report “to avoid moving lower in the prompt month”, it added.
Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold a position in the commodities and securities he writes about.