March natural gas futures were sharply lower Thursday, Feb. 1, as natural gas inventories fell by less than both expectations and the five-year average. The contract traded to a $2.837/MMBtu better-than-three week low following the midmorning release of the latest storage data and closed the session 13.9 cents lower at $2.856/MMBtu.
The U.S. Energy Information Administration reported a net 99-Bcf withdrawal from natural gas inventories during the week ended Jan. 26 that was below expectations that called for a 102-Bcf drawdown from stocks and well below the 160-Bcf five-year-average pull.
Although a comparison with the 92-Bcf year-ago withdrawal widened the year-on-year deficit to 526 Bcf, the pull brought total U.S. working gas supply to 2,197 Bcf, shrinking the year-on-five-year average deficit to 425 Bcf.
The trimming of the deficit to the closely watched five-year-average storage level signaled the market lower, while midrange weather forecasts combined with longer-range weather outlooks and demand prospects to further dampen the market.
"I think that the bullish attitude of natural gas due to demand is dying rather quickly, and I think at this point we are going to go looking towards the $3 level underneath," FX Empire analyst Christopher Lewis said.
Feeding the expectation for declining demand, the latest National Oceanic and Atmospheric Administration's six- to 10-day weather outlook shows below-average temperatures shrinking away from the eastern U.S.
Only portions of the Northeast and mid-Atlantic will join a larger portion of the central U.S. under below-average conditions in the six- to 10-day period. The majority of the region will see average temperatures that span into the Gulf and portions of the south-central, west-central and northwest regions. Above-average temperatures are forecast for a portion of the Southeast and for the majority of the West.
Below-average temperatures return to engulf nearly the entire eastern half of the U.S. in the eight- to 14-day period, with average temperatures gripping a small portion of the Southeast, the Gulf and a portion of the west-central U.S., while above-average temperatures hold the West.
Despite the returning cold weather, longer-range weather outlooks feed continued losses for March natural gas.
The Weather Company is calling for warmer-than-normal weather across the southern U.S. and colder-than-normal conditions for the northern half of the country from February through April. The National Oceanic and Atmospheric Administration sees a 40% or better chance that above-normal temperatures will prevail across much of the Northeast, the Southeast, the south-central U.S., Texas and parts of the West Coast over the same period, as average to below-normal temperatures settle over the Midwest and parts of the Northeast, Northwest and the north-central U.S.
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