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May natural gas slips as revised weather outlook suggests declining demand

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May natural gas slips as revised weather outlook suggests declining demand

Maynatural gas futures moved lower in the week's closing session Friday, April 8,pressured by the weight of a record end-of-season natural gas inventory and theimpending arrival of spring weather. The contract settled 2.8 cents lower onthe day at $1.990/MMBtu.

Revisedweather forecasts from the National Oceanic and Atmospheric Administration showwarming across the majority of the country that should work to deflate thelingering heating demand that helped prop up values in recent sessions.

DespiteFriday's losses, natural gas futures were 3.4 cents higher week on week, due tocolder weather forecasts for the near-term in previous weather projections.

Thelatest six- to 10-day map shows average temperatures in the Northeast, Midwest,portions of the Mid-Atlantic, central U.S. and Southwest, while above-averagetemperatures engulf portions of the central U.S. Northeast and parts ofCalifornia and Florida. Below-average temperatures are forecast for portions ofthe Mid-Atlantic and Southeast as well as for a portion of the Southwest andRockies.

Forthe eight-to 14-day period, the NOAA anticipates above-average temperatureswill dominate the U.S., with only a small portion of Florida and a portion ofthe Southwest expected to see average readings. Below-average temperatures areabsent the map.

Weatherchanges should ensure lower demand, while at the same time production datashows producers continuing efforts to quell output. The U.S. Energy InformationAdministration reported in its latest "Natural Gas Weekly Update"that while total natural gas supply increased in the review week to April 6,dry natural gas production fell by 0.2% week on week, adding to prior-weekdeclines to signal a producer response to the current supply and demandscenario.

Withthe withdrawal season reaching its titular end on March 31, the from theEIA showed a net build of a 12 Bcf to underground storage in the week to April1 that brought the total working gas supply to a fresh end-of-season record of2,480 Bcf.

Marketparticipants are looking for a wearing down of the record supply ahead of thenext shoulder period, concerned that natural gas could build beyond capacitylimits ahead of the winter withdrawal season.

Thehefty supply and lackluster demand will continue to weigh on values until somegreater evidence of a rebalancing of the market.

Day-ahead markets mixed byvaried weather, weekend inclusion

Day-aheadmarket action was mixed by varied weather and weekend inclusion in thethree-day package moved in the Friday session.

TheNortheast markets were mixed as, despite weekend inclusion, cold weathersupported some upside at Algonquin Citygates and Iroquois-Waddington. Algonquinadded nearly 50 cents on the session to an average around $4.20, and atIroquois-Waddington posted a gain of more than 5 cents to an index atop $2.20.In and around New York, milder weather and weekend inclusion worked the priceof Tetco-M3 deals down more than 10 cents to below $1.60 and Transco Zone 6 NYdown more than 1 cent to around $1.70.

Garneringsome modest support from prior gains in natural gas futures, the benchmarkHenry Hub was up about 5 cents to an index near $2.00. Elsewhere in the Gulf,weekend inclusion anchored values to the downside. Losses on either side of 1cent at Col Gulf Mainline and FGT Zone 3 brought indexes to around $1.85 andbelow $1.90, respectively. In line with the modest uptick at the Henry Hub,deals at Chicago ticked up to an average near $2.00 and Waha traded up toaround $1.80.

Marketsto the west were mostly steady with changes of less than 1 cent on either sideof prior-day averages. SoCal border marked its index around $1.80, PG&E Gatefound its average near $1.90 and Malin averaged atop $1.75.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.