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March gas posts gains amid buying at lows

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March gas posts gains amid buying at lows

After extending 11.5 cents lower to a finish at $3.117/MMBtu in the prior session, March natural gas futures ticked higher overnight ahead of the Wednesday, Feb. 1, open, in bargain hunting with little in the way of fundamental support, as predominantly milder weather in store spells diminished heating demand that should allow a further step down in rate of storage erosion. The contract moved to a $3.228/MMBtu overnight high and was last seen 6.8 cents higher on the session at $3.185/MMBtu.

The latest National Weather Service forecast maps show above-average temperatures enveloping nearly the entire country in both the upcoming six- to 10-day and eight- to 14-day periods. Average to below-average temperatures settle over the Northwest and the upper tier of the Midwest in the near term, but below-average temperatures disappear and average temperatures shift in scope to encompass the fringes of the Northeast and portions of the east-north-central U.S. further out.

Weather as projected suggests declining natural gas demand for heating, which should limit drawdowns from working gas stocks in the coming weeks.

Natural gas storage levels have declined considerably in recent weeks, but after a 243-Bcf drawdown in the week to Jan. 13, the larger storage withdrawals are expected to have already been booked.

The subsequent storage report from the U.S. Energy Information Administration outlined a 119-Bcf draw for the week to Jan. 20 that was below the average anticipated 121-Bcf pull, as well as both the 176-Bcf five-year-average drawdown and the 202-Bcf withdrawal seen in the corresponding week in 2016. It took total working gas stocks to 2,798 Bcf, or 348 Bcf below the year-ago level and 20 Bcf below the five-year average of 2,818 Bcf.

Market participants anticipate another lackluster pull from storage when the EIA releases its next weekly inventory data at 10:30 a.m. ET on Thursday, Feb. 2, as estimates suggest a drawdown in the 90s Bcf for the review week to Jan. 27.

Warmer weather during the storage report week is seen to have sapped demand and kept a lid on the amount of natural gas drawn from inventories. The EIA's latest "Natural Gas Weekly Update" for the week ended Jan. 25 shows that consumption in the residential and commercial sectors fell by 15% week on week to average 31.6 Bcf/d, or 36% below the level seen in 2016.

A declining pace of storage erosion amid abating weather-related demand should encourage natural gas supply to remain ample at the end of the withdrawal season.

In cash trade, price action for day-ahead natural gas unraveled in much of the country Tuesday amid weather pressure and weakness at the futures arena.

Looking at the key delivery locations, a 32-cent decrease took Transco Zone 6 NY spot gas pricing to an index at $3.008/MMBtu, as an almost 22-cent decline steered benchmark Henry Hub next-day gas price activity to an average at $3.000/MMBtu. A near 11-cent slump drove Chicago hub action to an index at $3.027/MMBtu, as an almost 10-cent retreat brought PG&E Gate cash gas pricing to an average at $3.446/MMBtu.

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On a regional basis, Northeast day-ahead gas price action shed about 27 cents to average at $3.317/MMBtu, as Gulf Coast cash gas price activity notched a near 17-cent decline in transactions averaging at $2.925/MMBtu. Midwest and West Coast spot gas prices faltered by around 10 cents on average to indexes at $2.944/MMBtu and $2.815/MMBtu, respectively.

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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.