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March natural gas futures slump as market awaits storage data

Following a 4.3-cent uptick in the prior session to finish at $2.659/MMBtu, NYMEX March natural gas futures pulled back overnight ahead of the Thursday, Feb. 22, open and the midmorning release of the weekly storage data that is expected to show a slower rate of stock erosion. At 6:35 a.m. ET, March natural gas futures were trading 2.3 cents lower at $2.636/MMBtu.

Weather that kept a lid on heating demand is expected to have limited the amount of natural gas drawn from underground storage facilities when the U.S. Energy Information Administration releases its next weekly storage report at 10:30 a.m. ET. Estimates for the forthcoming inventory data that will cover the week ended Feb. 16 span withdrawals from 105 Bcf to as much as 128 Bcf, with consensus formed at a 116-Bcf drawdown. That will compare to a 92-Bcf year-ago pull and the 145-Bcf five-year-average draw.

Degree day data from the National Oceanic and Atmospheric Administration for the week to Feb. 17 reflect heating degree days that were 15.9% less than the norm.

A storage draw within the range of projections would signal a step lower in rate of weekly withdrawals as it would come on the heels of a surprisingly large 194-Bcf draw in the week ended Feb. 9 that took total working gas stocks to 1,884 Bcf, or 577 Bcf below the prior-year level and 433 Bcf below the five-year average of 2,317 Bcf.

Weather in store spells lackluster demand support in the weeks ahead, likely to keep the rate of storage draws subdued approaching the traditional end of the withdrawal season on March 31.

The National Weather Service projection for the six- to 10-day period shows the country split between above-average temperatures over nearly the entire eastern third of the U.S. into the south-central U.S. and below-average temperatures over nearly the entire West and a few parts of the Midwest, with a band of average temperatures along the central U.S. separating the extremes.

In the eight- to 14-day outlook, above-average temperatures shrink in scope to be contained to a small area of the south-central U.S., giving way to average temperatures that overtake a majority of the central and eastern U.S. Below-average temperatures spill into about half of the Midwest and re-appear over the lower tier of the Mid-Atlantic into a corner of the Southeast.

Although seasonable to colder-than-normal weather returns to the central and eastern U.S. in the longer-range view, weather-driven demand support is limited by the implications of the calendar. "The winter is winding down and any bouts of cold weather is not likely to last for an extended period nor is it likely that cold temperatures at the end of March will be anything like cold temperatures during January," Energy Management Institute principal Dominick Chirichella said in a Feb. 22 note to clients.

Day-ahead natural gas price activity was choppy Feb. 21 on the back of varied weather outlooks.

On a regional basis, Northeast spot gas price action added about 28 cents on the session to average at $2.544/MMBtu, as Gulf Coast next-day gas pricing logged a roughly 3-cent uptick in deals averaging at $2.556/MMBtu. By contrast, West Coast day-ahead gas prices fell by nearly 27 cents on average to an index at $3.436/MMBtu, as Midwest cash gas price activity faltered by almost 2 cents to an index at $2.559/MMBtu.

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Among the key hubs, however, the upside prevailed. Day-ahead gas prices at Transco Zone 6 NY rose by approximately 21 cents on average to an index at $2.725/MMBtu, as benchmark Henry Hub spot gas price action tacked on around 4 cents to average at $2.650/MMBtu. Cash gas price activity at PG&E Gate was bolstered by about 6 cents to an index at $3.340/MMBtu, as Chicago hub pricing posted a roughly 2-cent increase in transactions averaging at $2.572/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.