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April natural gas futures reach higher amid varied fundamentals

After climbing by 2.4 cents in the prior session to settle at $2.675/MMBtu, NYMEX April natural gas futures meandered overnight before reaching higher ahead of the Wednesday, March 21, open as market participants considered choppy fundamentals. At 7:10 a.m. ET, the contract was 2.3 cents higher at $2.698/MMBtu while trading from $2.671/MMBtu to $2.708/MMBtu.

Varied mid- and longer-range weather expectations look to generate diverging demand patterns going forward.

The six- to 10-day outlook from the National Weather Service shows the bulk of the country's eastern two-thirds encompassed by average to above-average temperatures, but the eight- to 14-day projection shows a majority of the central U.S. and mid-Atlantic into portions of the Northeast gripped by below-average temperatures.

The shorter-range view is expected to see below-average temperatures confined to most of the Northeast and the western U.S., while the extended period is forecast to see average to above-average temperatures hold over much of the West and the balance of the eastern U.S.

Further out, The Weather Company sees warmer-than-normal weather over the southern tier of the U.S. in the April-through-June period and colder-than-normal conditions over the northern Plains and Northwest, while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country through the same period and equal chances of below-average, normal or above-average temperatures over the Pacific Northwest and north-central U.S.

Adding to the uncertainty, overall moderate weather associated with the onset of the spring shoulder season is expected to keep demand subdued and allow for the changeover from weekly storage draws to injections and is keeping downside risks viable for gas futures, but the anticipation of a significantly diminished end-of-withdrawal-season storage is feeding bullish sentiments in the market.

Working natural gas in storage was at 1,532 Bcf, or 718 Bcf below the year-ago level and 296 Bcf below the five-year average of 1,828 Bcf, after the U.S. Energy Information Administration outlined a 93-Bcf withdrawal during the week ended March 9.

Elevated demand amid lingering cold is expected to have driven a withdrawal in the upper 80s Bcf to the low 90s Bcf when the next weekly storage data that will cover the week to March 16 is released on Thursday, March 22, which would be below a 137-Bcf prior-year pull but above the 53-Bcf five-year average draw.

Assuming storage draws match the five-year average for the remainder of the withdrawal season, the EIA sees working gas stocks reaching 1,406 Bcf on March 31, which is 17% lower than the five-year average.

Price action for natural gas booked Tuesday for Wednesday flow was predominantly stronger on the back of mostly rising demand outlooks.

Among the key hubs, Transco Zone 6 NY spot gas prices led the charge higher with a roughly 96-cent increase on average to an index at $3.843/MMBtu. Chicago next-day gas price activity followed distantly with an approximately 5-cent uptick in deals averaging at $2.543/MMBtu, then PG&E Gate hub action that tacked on about 4 cents on the day to average at $2.723/MMBtu and benchmark Henry Hub cash gas pricing that rose by 3 cents to an index at $2.710/MMBtu.

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On a regional basis, Northeast day-ahead gas pricing added around 23 cents on the day to average at $3.292/MMBtu, as Midwest cash gas price action logged a near 5-cent gain in trades averaging at $2.399/MMBtu. Spot gas price activity in the West was almost unchanged day on day at an index at $1.989/MMBtu, while next-day gas prices on the Gulf Coast were up about 6 cents on average at an index at $2.650/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.