After extending 2.2 cents lower to settle at $2.558/MMBtu ahead of the long holiday weekend, NYMEX March natural gas futures climbed overnight leading up to the Tuesday, Feb. 20, open, in buying amid oversold conditions but absent any significant fundamental support. At 6:55 a.m. ET, the contract was 7.6 cents higher at $2.634/MMBtu.
Recent and potential lackluster demand suggests a renewed slowdown in the rate of weekly storage draws in the forthcoming inventory reports, which should allow for more natural gas to remain in underground storage facilities approaching the traditional end of the withdrawal season on March 31.
Colder weather that bolstered heating demand is seen to have allowed for the surprisingly large 194-Bcf drawdown reported by the U.S. Energy Information Administration in its latest storage data for the week ended Feb. 9 that bested the full range of estimates coming into the day, as well as the 120-Bcf year-ago pull and the 154-Bcf five-year-average withdrawal. Total working gas stocks were at 1,884 Bcf, or 577 Bcf below the year-ago level and 433 Bcf below the five-year average of 2,317 Bcf.
The EIA sees natural gas inventories ending the traditional withdrawal season on March 31 at 1,269 Bcf, or 25% lower than the five-year average and the second lowest end-of-season level reported since 2010, should net withdrawals match the five-year average for the remainder of the heating season.
Diminished demand alongside steady production in the succeeding days, however, suggests a step lower in the pace of stock erosion in the subsequent inventory data. The EIA's latest "Natural Gas Weekly Update" for the week to Feb. 14, much of which will be reflected in the next storage report that will cover the week to Feb. 16, reflects a 7% week-over-week decline in total U.S. gas consumption to 86.4 Bcf/d and production almost flat at 78.1 Bcf/d.
Further out, National Weather Service outlooks for the both the six- to 10-day and eight- to 14-day periods show above-average temperatures enveloping nearly the entire central and eastern U.S., which should sap natural gas demand for heating and leave more natural gas available in storage.
Average temperatures linger over a narrow band stretching from the west-central U.S. into the Southwest through both periods, as below-average temperatures settle over most of the West into portions of the Midwest.
Additional production anticipated should augment supply, heaping additional fundamental pressure on values. The EIA expects that shale output of natural gas will have grown for 12 consecutive months in March, with gas output coming in 19.0% above the same month a year earlier to set a new record.
Spot natural gas pricing unraveled in much of the country on Feb. 16 amid pressure from inclusion of the holiday and weekend days in the package that was revised for Saturday-through-Tuesday flow to accommodate business closures during the holiday.
Looking at the key hubs, a roughly 11-cent retreat drove PG&E Gate day-ahead gas price action to an index at $2.719/MMBtu, as a near 3-cent slump took Chicago next-day gas pricing to an average at $2.414/MMBtu. An almost 2-cent reduction nudged benchmark Henry Hub cash gas price activity to an average at $2.474/MMBtu, as an approximately 7-cent increase against the broad downtrend steered Transco Zone 6 NY hub pricing to an index at $2.600/MMBtu.
In regional terms, West Coast spot gas price activity bucked the wider decline with a near 1-cent gain in deals averaging at $2.296/MMBtu, as Midwest cash gas pricing shed 5 cents on the session to average at $2.303/MMBtu. Gulf Coast next-day gas price action was off about 1 cent day on day at an index at $2.440/MMBtu, while Northeast day-ahead gas prices were around 18 cents weaker on average at an index at $2.316/MMBtu.
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