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April natural gas relinquishes gains as expiration nears

April natural gas futures gave back early gains to settle on the negative side of the ledger in the week's opening session Monday, March 27. The market is finding little to support gains ahead of options expiration at the close of business Tuesday and the contract's roll off the board at Wednesday's close. Weather outlooks signal demand erosion, and the natural gas supply looks to end the withdrawal season at a healthy level.

The contract worked its way to a $3.133/MMBtu high early, but it backed off the high to post a $3.046/MMBtu low before settling 2.4 cents lower on the session at $3.052/MMBtu.

With attention on supply, as the titular withdrawal season ends March 31, market participants found little to support April futures higher, as inventories are expected to draw lower for one additional week and leave the total working gas supply atop 2.0 Tcf to start the shoulder season.

Analysts and traders looking at the storage report due out March 30, covering the week to March 24, see a storage withdrawal from the upper 30s Bcf to the low 50s Bcf.

Inventories were drawn 150 Bcf lower for the week to March 17, a pull that was below consensus estimates but above the five-year average withdrawal of 21 Bcf and the 13-Bcf injection reported for the same week in 2016.

The draw left the total U.S. working gas supply at 2,092 Bcf, or 399 Bcf below the year-ago level and 266 Bcf above the five-year average storage level of 1,826 Bcf.

A drawdown within the range of projections for the week to March 24, would still leave stocks above 2.0 Tcf, as withdrawals turn to injections in subsequent weeks, triggered by warmer weather and softening demand.

The latest six- to 10-day weather map from the National Weather Service outlines average temperatures for a portion of the Northeast and portions of the south central and Northwest. Above-average temperatures are forecast for the remainder of the country.

SNL Image

In the eight- to 14-day period, the weather service expects above-average temperatures to dominate across the country, with only a portion of the Northeast expected to see average temperatures.

SNL Image

Weather should drive a reduction in demand for heating ahead of any significant ramp up in cooling demand, allowing natural gas inventories to begin a long period of building ahead of the summer cooling season.

Before the warming, weather forecasts for Tuesday supported a price hike for natural gas moved at the day-ahead markets for delivery to key hubs across the country.

Transco Zone 6 NY traded about 15 cents higher to an index near $2.70 and Tetco-M3 added a similar amount to a near equal average. Henry Hub trades were boosted nearly 5 cents to an index near $2.95, Waha gained about 10 cents to an index near $2.75 and Chicago advanced about 5 cents to an index near $2.90. At the SoCal Border, a gain of about 5 cents brought the index near $2.70 and PG&E Gate added a similar amount to an average atop $3.20.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities pages.