April natural gas futures finished lower Thursday, March 8, as inventories eroded at a pace below the five-year average and medium-term weather forecasts show the return of average and above-average temperatures to the major heat-consuming regions of the U.S. The contract settled the session 2.1 cents lower at $2.756/MMBtu.
The U.S. Energy Information Administration reported a net 57-Bcf withdrawal from natural gas inventories in the Lower 48 during the week ended March 2 that was at par with the corresponding week in 2017 and well below the five-year average. The market consensus ahead of the report's release called for a 58-Bcf drawdown from stocks against respective year-ago and five-year average withdrawals of 57 Bcf and 129 Bcf.
The pull brought total U.S. working gas supply to 1,625 Bcf, or 680 Bcf less than 2017 at this time and 300 Bcf below the five-year average of 1,925 Bcf.
Larger storage withdrawals are expected when the EIA releases its reports for the current week and the week to March 16 as winter storms blast across the country. Early projections for storage reports covering the weeks to March 9 and March 16 show withdrawals in the low 100s Bcf.
The EIA anticipates an end-of-season working gas supply of about 1,330 Bcf, which would be the second-lowest level for natural gas inventories since 2010.
However, weather outlooks show changes that should equate to lower demand for heating.
The National Weather Service's forecast for the six- to 10-day period shows average and below-average temperatures gripping the majority of the Northeast, the mid-Atlantic, the Southeast, the Midwest and the Gulf regions while also holding portions of the north-central and West. Above-average temperatures grip a large portion of the central U.S. and the remaining areas in the West.
The area of below-average temperatures is expected to shrink in the East over the eight- to 14-day period to include only a portion of the Northeast and mid-Atlantic. Average and above-average temperatures will dominate in the eastern half of the country while below-average temperatures span across the majority of the western half of the country through the period.
As temperatures moderate and heating demand recedes, natural gas inventory withdrawals should slow into a period of injections leading up to the next major demand period.
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