After shedding 2.6 cents to settle at $2.591/MMBtu ahead of the weekend, NYMEX April natural gas futures continued to unwind overnight leading up to the Monday, March 26, open, as the market shrugged off lingering cold in the midrange outlook in favor of milder spring weather likely to keep demand subdued. At 6:45 a.m. ET, the contract was 1.0 cent lower at $2.581/MMBtu.
Although cold weather continues to grip major heat-consuming regions in forecasts, moderating conditions associated with the spring shoulder season will likely sap late-season heating demand ahead of a bump up in cooling load and allow for the changeover from weekly storage withdrawals to injections.
National Weather Service forecasts for the six- to 10-day and eight- to 14-day periods show below-average temperatures spanning the Northeast, mid-Atlantic, Midwest, parts of the Northwest and fringes of the South, as average to above-average temperatures settle over a majority of the West and the South.
Already diminished demand of late suggests the possibility of a step lower in the rate of weekly inventory draws when the U.S. Energy Information Administration releases its next weekly storage report that will cover the week ended March 23.
The latest "Natural Gas Weekly Update" for the week to March 21, much of which will be reflected in the forthcoming inventory data, shows total U.S. gas consumption was 5% lower week on week but dry production was up 1%.
Total working gas stocks currently 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, after the EIA outlined an 86-Bcf drawdown for the week ended March 16.
The EIA sees working gas stocks ending the traditional withdrawal season 19% lower than the five-year average at 1,373 Bcf assuming storage draws match the five-year average for the remainder of the season. However the anticipated demand erosion amid milder spring weather combined with production gains and a rising rig count are allaying worries over supply going forward.
For the three-month period of April through June, forecasters see a warming trend. The Weather Company sees warmer-than-normal weather over the southern tier of the U.S. while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country.
Baker Hughes' latest North America Rotary Rig Count for the week ended March 23 shows the combined oil and natural gas rig count in the U.S. was up five on the week at a total of 995. Oil-directed rigs were up four on the week to reach 804, while natural gas-directed rigs were up one on the week at 190.
Cash hubs predominantly favored the downside on March 23, as the inclusion of the low-demand weekend days in the natural gas offering that was revised for Saturday-through-Monday flow weighed down on values.
Looking at the key delivery locations, a 14-cent decline steered PG&E Gate spot gas pricing to an index at $2.542/MMBtu, as near 5-cent losses on average took Chicago and benchmark Henry Hub next-day gas prices to indexes at $2.426/MMBtu and $2.578/MMBtu, respectively. Defying the broad retreat, a near 8-cent gain drove Transco Zone 6 NY hub activity to an index at $2.811/MMBtu.
Regional averages were weaker overall. Day-ahead gas price action in the West unraveled about 8 cents on the session to average $1.932/MMBtu while Midwest cash gas price activity logged an approximately 11-cent reduction in deals averaging at $2.191/MMBtu. Next-day gas pricing in the Gulf producing region slumped by 3 cents to an index at $2.525/MMBtu as Northeast spot gas prices faltered by around 4 cents on average to an index at $2.625/MMBtu.
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