Natural gas daily recap: May 1

Mike Zaccardi, CFA, CMT

- Natural gas futures fell $0.059, -3.8%, to settle at $1.89 on Friday, backing away from 10-week highs

- Cash was lower, trading at a discount to the prompt; Cal 22 was about unchanged

- On the chart, support is near $1.50, $2.00 is resistance

Natural gas prices closed in the red to wrap up the work week as $2.00 remains stubborn resistance technically. Fundamentally, production saw a huge drop, but the market expects revisions to that low figure reported Friday morning. With more oil & gas bankruptcies imminent, dry gas production is expected to decline this year. Shut-ins reports by the oil majors is also an important factor, not just chapter 11 filings. The declining production story is interesting in that the first wave of cuts will be rather meaningless since the first to go will be ‘flared’ gas, but then the hits really come in earnest afterward. LNG exports may be slower to decline since contracts for delivery are long-term in nature, but those too are expected to take a hit since US LNG pricing at the gulf coast has converged with European and Asian benchmarks. The weather picture will be somewhat strong this week with pesky chilly conditions stretching from the Great Lakes to the Northeast, hitting the demand centers. The West has been warm in the meantime. The pattern looks to east next week however. Significant builds to storage is the market expectation during May with huge amounts of coal to gas switching taking place relative to prior years.

- Cash prices at Henry Hub cleared at $1.65/MMBtu (-$0.015) for Gas Day 2-4
- ICE weekly futures suggest a build of 85 Bcf on May 7 and 87 Bcf on May 14. Fall 2020 futures put storage at 3.875 Tcf on November 12 (5-year average: 3.68 Tcf, 2019: 3.73 Tcf).

Crude oil rose $0.94 to settle at $19.78 on Thursday. Gasoline was lower by $0.0174 to close at $0.7663. Heating oil futures lost $0.037 to settle at $0.7961. Oil prices for June delivery jumped to cap off a good week. $20 was eclipsed early in the session. Further out on the curve, however, WTI was materially lower. The average price for US oil is about $25 for the back-half of the year.