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Weather supports gains as April gas futures expire, May takes lead

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Essential Energy Insights - February 2021

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Message in a (Word)Cloud

Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


Weather supports gains as April gas futures expire, May takes lead

Aprilnatural gas moved higher in its final day as the lead contract, taking signalsfrom weather forecasts that suggest lingering heating demand in the Northeastand rising cooling load across the western half of the U.S. Rising to a$1.914/MMBtu high in short covering ahead of expiration at the close, thecontract rolled off the board at $1.903/MMBtu, higher by 5.5 cents.

Extremebelow-average temperatures will engulf the Northeast and below-averagetemperatures will grip the Midwest along with the Mid-Atlantic and portions ofthe Southeast through the six- to 10-day period, while above-averagetemperatures will dominate from the West across nearly the entire central U.S.,according to the National Oceanic and Atmospheric Administration.

Inthe eight- to 14-day period, below-average temperatures linger across themajority of the East and maintain dominance over the bulk of the country.

Withweather driving demand into the early spring season the market found someupside support to build gains ahead of the April contract's expiration. Maynatural gas followed April futures to a finish at $1.981/MMBtu, higher by 4.5cents, as hot weather deeper into spring should boost cooling demand and workto tighten the supply/demand balance.

Thenatural gas inventory continues to limit the upside as stocks currently sit at2,493 Bcf, or 1,017 Bcf above the year-ago level and 846 Bcf above thefive-year average storage level of 1,647 Bcf, after a rare mid-March was reportedby the U.S. Energy Information Administration for the week to March 18.

Participantsare expecting a return to withdrawals when the EIA releases its next report at10:30 a.m. ET on Thursday, March 31, that will cover the week to March 25.Analysts and traders eyeing the report anticipate withdrawals spanning 16 Bcfto 33 Bcf, with consensus formed around a 24-Bcf pull.

Atconsensus, the total natural as supply would slip to 2,469 Bcf, still wellabove historical average and on track toward an end-of-season supply near theMarch 31, 2012, record of 2,473 Bcf.

Naturalgas inventories are expected to plague the market through the shoulder seasonuntil demand steps up and production cuts begin to reflect the significantlydiminished rig countto tighten the incongruent supply/demand balance.

Day-ahead markets priedhigher by weather

Spotgas trades were higher with the gains in natural gas futures and with thesupport of demand as diverging weather coast to coast supported a mix ofheating and cooling demand to prop up values of gas scheduled for Wednesdayflow.

Northeastmarkets were up in response to strong demand on lingering heating. AlgonquinCitygates lifted nearly 25 cents to an index below $1.80, while at theCanadian-border Iroquois-Waddington hub, trades averaged about 10 cents higherto an index near $1.95. Outside of New York, the Tetco-M3 price was higher byabout 5 cents with the index pegged near $1.40 while inside New York at TranscoZone 6 NY deals bucked the wider trend for a loss of about 10 cents as amplesupply helped drive the index to near $1.45.

Again of about 5 cents at the benchmark Henry Hub signaled similar gains acrossthe region and in the Midwest. Col Gulf climbed to an index near $1.70, FGTZone 3 was up to an index near $1.85, Waha gained to an index atop $1.65 andChicago was boosted to atop $1.80. Advances in West hub values were similar atPG&E Gate and Malin, where indexes were pegged at around $1.90 and $1.65,respectively, while a larger gain of about 10 cents on the back of hot weatherdrove the SoCal Border index to near $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.