Natural gas futures were trading close to even early Tuesday, with the looming expiration of the April contract thus far failing to produce any fireworks amid depressed pricing at the front of the curve.
The April Nymex contract was unchanged at $1.615/MMBtu as of 8:46 a.m. ET. May was off fractionally at $1.787.
Analysts at Mobius Risk Group called it a “remarkably quiet start to the week for the natural gas market” after contracts further along the strip saw relatively little movement.
“The glaring question facing the market is when the phrase ‘ the best cure for low prices is low prices’ will become reality,” the Mobius analysts said.
On the other hand, even as mild weather has left the market with a hefty storage surplus heading into the injection season that has suppressed prices, the outlook could be very different a year from now.
“Beyond the very immediate need the market sees in relation to excess inventory, the next pressing question is whether” 2025 and 2026 contracts “are priced high enough to incentivize the amount of supply needed to serve LNG export expansions, which will begin ramping up later this year,” the Mobius analysts said. “From our perspective, a definitive answer to this question is elusive, as next winter’s weather will have much to say about supply needs,” with rig activity this year also a significant variable.
In the immediate term, weakness in the spot market could signal further downside for futures as the April Nymex contract rolls off the board, EBW Analytics Group analyst Eli Rubin told clients early Tuesday.
Henry Hub spot prices tumbled 7.0 cents to average $1.460 in Monday’s trading, according to NGI’s Daily Gas Price Index.
The Henry Hub spot prices sold off despite “a blizzard spanning from Colorado to the Upper Midwest,” Rubin said. “Physical weakness is occurring even with Bakken gas production 5% off highs set just 10 days ago.”
Now that the November-to-March heating season is nearly in the books, the typically mild weather-driven demand of the shoulder season looms for a market already under downward pressure.
Shoulder season conditions “may prolong recent price weakness for natural gas — even as the storage surplus versus the five-year average begins to decline and offer a degree of fundamental support during a difficult stretch for Nymex natural gas,” according to Rubin.
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