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April natural gas futures extend losses as warmer weather eyed

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April natural gas futures extend losses as warmer weather eyed

Following a finish 2.1 cents lower at $2.756/MMBtu, April natural gas futures were extending lower overnight ahead of the Friday, March 9, trading session. At 7:30 a.m. ET, the contract was 1.1 cents lower at $2.745/MMBtu.

The contract remains under pressure following the March 8 report of a net 57-Bcf withdrawal from natural gas inventories during the week ended March 2 that was on 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 last year at this time and 300 Bcf below the five-year average of 1,925 Bcf.

The modest pull is expected to be followed by larger withdrawals in the low 100s Bcf for the weeks ended March 9 and March 16, as colder weather returned to key heat-consuming regions during the current week and is expected to linger at least through mid-March.

The National Weather Service forecast for the six- to 10-day period shows average and below-average temperatures gripping the majority of the Northeast, the mid-Atlantic, Southeast, Midwest and 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 shrinks 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 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.

Driven by the colder conditions, demand for natural gas rose during the review week to March 7, much of which will be included in the next storage report due out on March 15. Total U.S. consumption of natural gas rose by 2% compared with the previous report week as natural gas consumed for power generation declined by 5% week over week, industrial sector consumption increased by 1%, and residential and commercial sectors consumption increased by 10%, the U.S. Energy Information Administration said in its latest "Natural Gas Weekly Update."

Natural gas exports to Mexico were the same as previous week averaging 4.3 Bcf/d.

Moderating weather to warmer conditions in spring, however, were limiting upside support as natural gas production continues to hold steady. The average total supply of natural gas remained the same as in the previous report week, averaging 84.4 Bcf/d, the EIA said. Dry natural gas production remained constant week over week, while average net imports from Canada increased by 8%.

Market participants continue to look at weather as a determinant for end-of-season inventories as weather drives natural gas demand. The EIA said if net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season, working gas stocks will total 1,402 Bcf by March 31, considered the traditional end of withdrawal season.

At that level, inventories will be 18% lower than the five-year average, the EIA said. Working gas stocks ended the 2013-14 heating season at 837 Bcf, which is the lowest-reported level for that time.

In day-ahead trade, natural gas moved at key trading hubs were lower in deals done for Friday, March 9, delivery.

Transco Zone 6 NY led the retreat with a 25.5-cent loss to an index at $2.800/MMBtu, Chicago followed, sinking 8.2 cents to an index at $2.556/MMBtu. At PG&E Gate, trade was down 5.7 cents to an index at $2.804/MMBtu while Henry Hub trade was 1.7 cents lower to an index at $2.780/MMBtu.

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Regionally, the West led the retreat sinking 16.5 cents to an index at $2.110/MMBtu, the Northeast slipped 7.0 cents to an index at $2.815/MMBtu, a loss of 6.9 cents in the Midcontinent drove the index to 2.471/MMBtu and the Gulf saw a 6.2-cent loss to an index at $2.620/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, natural gas and coal index prices, as well as forwards and futures, visit our Commodities pages.