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Hopes of market balancing drive more gains in gas futures


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Hopes of market balancing drive more gains in gas futures

Maynatural gas futures extended gains Wednesday, April 13, as the marketanticipates natural gas production decline will begin to balance the market.The contract settled 3.2 cents higher at $2.036/MMBtu.

Despitenear and mid-range weather projections that point to a lack of demand, and anexcessive natural gas inventory, the natural gas market managed additionalgains in the midweek session as traders are becoming convinced of a wear downin supply from the production side.

Weatherforecasts project weak demand, as the latest maps from the National Oceanic andAtmospheric Administration show above-average temperatures dominating thecountry in both the six- to 10-day and eight- to 14-day periods.

Averagetemperatures will grip portions of Texas and the Mid-Atlantic in the six- to10-day projection and in south Texas and the Northeast in the eight- to 14-dayperiod, while below-average temperatures are seen only in patches of Texas andthe Northeast in the six- to 10-day outlook.

Mildweather should put an end to natural gas withdrawals after a cold snap in theweek to April 8 that is anticipated to have driven demand high enough to resultin a modest natural gas storage drawdown when the U.S. Energy InformationAdministration releases its next report at 10:30 a.m. ET on Thursday, April 14.

Asurvey of analysts and traders shows expectations for a 13-Bcf withdrawal to asmuch as a 10-Bcf build, with a consensus expectation at a 1-Bcf withdrawal forthe week. The 1-Bcf pull would compare against a five-year average injection of22 Bcf and the 49-Bcf injection reported for the same week in 2015.

The1-Bcf pull anticipated in this week's data would result in a total working gassupply at 2,479 Bcf, just below the 2,480-Bcf record high end-of-season supplyreached in the previousweek, when the EIA reported a 12-Bcf net injection into inventoriesfor the week to April 1.

Witha draw at expectations, the year-on-year surplus would slip to 958 Bcf and theyear-on-five-year average surplus to 851 Bcf.

Despitethe excessive supply, natural gas production decline was signaled by the latestDrilling ProductivityReport from the Department of Energy that showed a 1.1% decline inU.S. shale gas production in May, which continued to generate a bullish marketresponse as production begins to reflect the sharp reduction in the natural gasrig count.

Therewere 89 rigs reported operating in the U.S. in the week to April 8, up one fromthe previous week but still down a massive 136 on the year.

Day-ahead markets sinkdespite futures' gains

Additionalgains by natural gas futures did little to inspire gains in cash gas trade asthe markets were mostly depressed by mild weather and lackluster demand.

Inthe Northeast, New York's Transco Zone 6 NY hub action was lower by more than 1cent with the index marked below $1.70, while at the Canadian border tradeswere about 20 cents lower to an index near $2.00. Outside of the New York,Tetco-M3 trades managed to eke out a gain of about 5 cents with the indexmarked near $1.65.

Elsewhere,a lack of fundamental support drove the Henry Hub about 10 cents lower to near$1.85, Waha slipped more than 1 cent to average near $1.75, Chicago tickednearly 10 cents lower to an average below $1.90, CIG Mainline slumped nearly 5cents to an index at around $1.65 and PG&E Gate traded nearly 5 cents lowerto an average below $1.90.

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.