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April gas futures climb on supportive storage expectations

Following a 3.7-cent retreat in the prior session to finish at $2.638/MMBtu, NYMEX April natural gas futures retraced higher overnight ahead of the Thursday, March 22, open and the midmorning release of weekly storage data poised to show a larger-than-average draw from stocks. At 6:55 a.m. ET (1055 GMT) the contract was 1.0 cent higher at $2.648/MMBtu.

Weather that generated 4.6% more heating degrees days than normal in the week to March 17 is expected to have encouraged a substantial inventory withdrawal in the forthcoming storage report due out from the U.S. Energy Information Administration at 10:30 a.m. ET on Thursday.

Market analysts and experts looking to the inventory data that will cover the week ended March 16 anticipate storage withdrawals spanning 85 Bcf to 93 Bcf, with consensus formed at a 90-Bcf drawdown. While a storage data within the range of outlooks would trail the 137-Bcf year-ago draw, it would exceed the 53-Bcf five-year average pull.

Working gas in storage currently stands at a total of 1,532 Bcf, or 718 Bcf below the year-ago level and 296 Bcf below the five-year average of 1,828 Bcf, after the EIA outlined a 93-Bcf drawdown in the week ended March 9.

A storage withdrawal at consensus would leave total working gas stocks at 1,442 Bcf, trimming the year-on-year deficit to 671 Bcf but widening the year-on-five-year-average deficit to 333 Bcf.

With a close eye on the approaching end of the traditional withdrawal season on March 31, the EIA sees storage draws matching the five-year average for the balance of the season leaving working gas stocks at 1,406 Bcf, or 17% lower than the five-year average.

Midrange weather forecasts reflecting stubborn cold suggest the possibility of residual heating demand in the coming weeks, but higher low temperatures implied by the calendar and a warming trend projected further out spell diminishing weather-driven demand support going forward.

The latest National Weather Service outlooks show below-average temperatures spanning most of the West and about half of the west-central U.S. in the six- to 10-day period, before shifting and expanding eastward to envelop portions of the Rockies and a majority of the country's eastern two-thirds in the eight- to 14-day period.

Average to above-average temperatures that initially encompass the West Coast and the bulk of the central and eastern U.S. eventually become contained to the balance of the South and most of the West.

For the three-month period of April through June, The Weather Company sees warmer-than-normal weather over the southern tier of the U.S. accompanied by colder-than-normal conditions over the northern Plains and Northwest, while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country and equal chances of below-average, normal or above-average temperatures over the Pacific Northwest and north-central U.S.

Warmer weather should sap lingering heating demand ahead of the onset of significant cooling load, allowing for the transition from weekly storage withdrawals to injections.

In cash trade, diverging demand outlooks drove choppy price activity for natural gas moved Wednesday for Thursday flow.

Looking at the key delivery locations, roughly 3-cent gains on average took benchmark Henry Hub and Chicago day-ahead gas prices to indexes at $2.742/MMBtu and $2.572/MMBtu, respectively. By contrast, a near $1.04 decline steered Transco Zone 6 NY spot gas price activity to an index at $2.800/MMBtu, as an approximately 3-cent slump nudged PG&E Gate hub action to an index at $2.690/MMBtu.

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On a regional basis, Gulf Coast cash gas pricing logged a near 2-cent reduction in deals averaging at $2.629/MMBtu, as Midwest next-day gas price activity unraveled about 3 cents to average at $2.370/MMBtu. Northeast spot gas price action tumbled by around 37 cents to an index at $2.921/MMBtu, as West Coast day-ahead gas prices advanced by roughly 2 cents on average to an index at $2.012/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.