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May natural gas futures seesaw ahead of 1st day in lead

Taking the lead from the April gas contract that rolled off the board in the prior session with a 7.3-cent gain at $2.691/MMBtu, NYMEX May natural gas futures seesawed in search of direction ahead of the Wednesday, March 28, open, supported higher by end-of-season storage expectations and midrange weather outlooks but pressured by impending warming.

On the heels of its finish 5.7 cents higher at $2.714/MMBtu, May futures traded from $2.695/MMBtu to $2.731/MMBtu and at 7:15 a.m. ET was 0.3 cent lower at $2.711/MMBtu.

The U.S. Energy Information Administration sees working natural gas in storage ending the traditional withdrawal season at 1,373 Bcf, or 19% lower than the five-year average, assuming inventory draws match the five-year average for the remainder of the season.

Estimates for subsequent storage reports, however, suggest a ramped-up rate of inventory erosion relative to historical averages.

For the forthcoming storage data due out on Thursday, March 29, that will cover the week ended March 23, market participants call for a withdrawal from 68 Bcf to 71 Bcf, which would exceed both the 46-Bcf five-year-average draw and a 58-Bcf year-ago pull. Early analyst projections for the inventory report for the week to March 30 point to a 29-Bcf drawdown, against a 28-Bcf five-year-average withdrawal and the 4-Bcf prior-year draw.

Total working gas stocks sit at 1,446 Bcf, or 667 Bcf below the year-ago level and 329 Bcf below the five-year average of 1,775 Bcf, following an 86-Bcf pull from storage in the week ended March 16.

Weather in store extends the possibility of ongoing storage erosion into early April, as lingering cold in forecasts looks to drive up heating demand. National Weather Service projections for the six- to 10-day and eight- to 14-day periods continue to reflect below-average temperatures over the Northeast, mid-Atlantic, Midwest, parts of the Northwest and the upper tier of the South, as average to above-average temperatures settle over much of the West and the balance of the South.

A warming trend that should erode demand as spring unfolds alongside expectations of production growth contain bullish sentiments, however. Longer-range weather outlooks for the April-June period call for warmer-than-normal weather over a large part of the U.S., while the latest rig count data reflects an uptick.

Cash gas prices varied Tuesday, as traders considered mostly sagging load forecasts alongside gains at the futures arena.

Looking at the key delivery locations, an approximately 3-cent reduction took benchmark Henry Hub next-day gas pricing to an index at $2.600/MMBtu, as roughly 2-cent losses on average steered Transco Zone 6 NY and PG&E Gate spot gas prices to indexes at $2.680/MMBtu and $2.540/MMBtu, respectively. Conversely, an almost 2-cent uptick brought Chicago hub action to an index at $2.403/MMBtu.

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Regionally, Gulf Coast cash gas price activity notched a near 1-cent gain in deals averaging at $2.524/MMBtu, while Northeast day-ahead gas pricing deflated by around 7 cents on the session to average at $2.443/MMBtu. West Coast spot gas price action climbed by about 6 cents to an index at $1.973/MMBtu, as Midwest next-day gas prices rose by roughly 11 cents on average to an index at $2.302/MMBtu.

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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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.