Nat Gas Lower Ahead Last Potential EIA Draw of Season

Natural gas futures are edging lower early Thursday as traders await the release of the government’s weekly storage report at 14:30 GMT, which could show the last withdrawal of the season.

U.S. futures rebounded to close higher on Wednesday as worries about Russia’s plan to price energy exports in rouble caused global energy prices to spike, keeping demand for U.S. liquefied natural gas (LNG) exports near record highs.

Today’s early price action suggests traders weren’t too rattled by Wednesday’s events which means the focus could shift back to potentially bearish forecasts calling for milder weather and lower demand than previously expected. This should allow utilities to inject gas into storage next week.

At 08:51 GMT, May natural gas futures are trading $5.523, down $0.082 or -1.46%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $19.37, up $0.77 or +4.14%.

Kremlin:  Russia Won’t Demand Immediate Switch to Rouble Gas Payments

Germany on Wednesday triggered an emergency plan to manage gas supplies in Europe’s largest economy in an unprecedented move that could see the government ration power if there is a disruption or halt in gas supplies from Russia. That caused gas prices at the Title Transfer Facility (TTF) in the Netherlands, the European benchmark, to jump about 18% to around $41 per million British thermal units (mmBtu) earlier in Wednesday’s session.

Russia, however, said it will not immediately demand that buyers pay for its gas exports in rouble, promising a gradual shift.

Short-Term Weather Outlook

According to Bespoke Weather Services, the early spring outlook for natural gas was neutral heading into Wednesday’s session. The American and European weather models were “mostly stable” day/day, with projected gas-weighted degree days for the 15-day period remaining “a little on the below-normal side.”

Futures often give up ground in the spring because heating demand dissipates and yet temperatures are too mild to galvanize widespread cooling demand. Bespoke said sharp weather swings are “often needed to move the needle much at this time of year,” but it sees “no extremes” in the upcoming pattern.

Daily Forecast

All eyes will be on today’s Energy Information Administration (EIA) storage report, due to be released at 14:30 GMT.

According to Natural Gas Intelligence (NGI), estimates submitted to Bloomberg as of Wednesday showed a median 25 Bcf injection for the week ended March 25. Projections ranged from 19 Bcf to 27 Bcf.

NGI also reported estimates in a Reuters poll ranged from a withdrawal of 8 Bcf to an injection of 34 Bcf, with a median increase of 22 Bcf. The Wall Street Journal’s survey found injection estimates spanning 8 Bcf to 29 Bcf and an average of 21 Bcf.

For the year-earlier period, EIA recorded a 7 Bcf build, while the five-year average is a withdrawal of 23 Bcf.

Even with an expected storage build next week and a weather-driven drop in demand, bullish traders still have several factors in their favor, especially robust demand for U.S. exports of liquefied natural gas (LNG).