Happy Monday, and Happy March!
The NYMEX April front month contract opened down and traded in the $3.82 US/mm range overnight but then rallied in the morning to a high of $4.22 at noon. It sold off in the afternoon, last trade being $4.14 US/mm. Feels like traders are adjusting their position for the new month.
The weather is certainly looking much warmer than February. Heating demand will be down, but a big part of that is normal seasonal warming. Any cold snap and big storage withdrawals will cause a lot of consternation in the market, but besides that possibility, we should be talking about injection season reasonably soon.
Producers had a tough February with all the freeze-offs (when output gets shut in because of the extreme cold) but they still managed to hit a new record average daily output for the month. February had an average daily output of 104.7 Bcf/day as compared to the previous record of 104.6 Bcf/day in December 2023 according to Reuters. The average output for March (so far) is 105.8 Bcf/day, so we might be looking at another new record, but the month is young and anything (or everything) can change.
The new tariffs are scheduled to go into effect tomorrow (25% on manufactured goods and 10% on energy) so perhaps that might be part of the rally we saw today. However, the Trump administration is treating the tariffs like a reality TV show and will not reveal what they are going to do until the last moment. The news said he will decide today and tell us all tomorrow. This might make for good television but bad economics. My analysis is that these tariffs will cause supply shock inflation in the US, which runs counter to the campaign promise to “cut prices at the pump”. Also, I don’t think even the White House advisors or Cabinet members know what is going to happen. Ontario Premier Doug Ford has promised retaliatory measures, including the possibility of cutting off the export of electricity to US. I believe this is the key to this issue: What will Canada do to retaliate? (Ottawa has been quiet about next steps…) This time tomorrow, we might be in a trade war… or not.
The CBC had a good article today about how the Aluminum industry is unbothered by these tariffs; “Jean Simard, CEO of the Aluminum Association of Canada, says most contracts between Canada and the United States have a clause built in agreeing that the American company purchasing Canadian aluminum will pay whatever tariffs are put in place.”
March might prove to be as interesting as February but for very different reasons. Stay tuned…