Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
The NYMEX April natural gas futures contract settled 0.3 cent lower Tuesday at $2.683/MMBtu on its first day as the front-month contract.
Prices continue to be blocked on the upside by robust production, slowing demand and a mild weather outlook.
The month of February has been bearish for the NYMEX front-month contract, as expectations of continued strong production outweighed strong demand and lower-than-normal storage inventories.
With weather forecasts not as cold as some may have thought, the market is “resuming downward pressure” after the expiration of March as the front-month contract and the small rally that accompanied it, said Phil Flynn, senior market analyst at Price Futures Group.
While the front-month contract is not “collapsing yet” based on the supply report, “expect a downside breakout” as $2.50/MMBtu levels are tested over the next few weeks, Flynn added.
US gas production has remained strong throughout February. Over the past seven days, dry gas production has averaged 77.3 Bcf/d, compared with a 77.3 Bcf/d for the whole of the month. Output is 6.3 Bcf/d higher than the 71 Bcf/d average for February 2017, according to S&P Global Platts Analytics data.
With the winter season quickly coming to a close, US demand is expected to dip compared with the average so far in February, as over the next seven days, demand is forecast to average 80.1 Bcf/d, an 8.5 Bcf/d drop from the 88.6 Bcf/d average so far this month, according to Platts Analytics data.
At the beginning of March, the most recent eight- to 14-day outlook from the US National Weather Service calls for slightly lower-than-average temperatures along the West Coast and in the Rockies, Texas, Midcontinent and Southeast.
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- Morning Grains Report 03/22/18
- Morning Softs Report 03/22/2018
- Tariffs Latest Market Jitters. The Corn & Ethanol Report 03/22/18
- Fed Raises Rates, Cattle on Feed. The Nemenoff Report 03/22/18
- Below Average. The Energy Report 03/22/18
- AGMASTER 03/21/18
- Morning Grains Report 03/21/18
- Morning Softs Report 03/21/2018