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May natural gas slumps amid bearish drivers

After climbing 6.5 cents in the prior session to finish at $3.331/MMBtu, NYMEX May natural gas futures recoiled overnight ahead of the Friday, April 7, open, as the market succumbed anew to fundamental pressure signaled by predominantly lackluster weather-related demand expectations that should allow for a ramp up in the pace of storage-building in the weeks ahead. At 7:15 a.m. ET (1115 GMT), the contract was 3.2 cents lower at $3.300/MMBtu, while trading a range from $3.296/MMBtu to $3.340/MMBtu.

The April 6 storage report from the U.S. Energy Information Administration outlined a net 2-Bcf injection to stocks for the week ended March 31, which is typically the final week of the titular withdrawal season. Total working gas stocks were brought to 2,051 Bcf, or 427 Bcf below the year-ago level and 265 Bcf above the five-year average of 1,786 Bcf.

Although the reported inventory build was a downside miss against the market consensus coming into the day that had called for a 9-Bcf addition to stocks and the 6-Bcf injection seen in the corresponding week in 2016, it defied the 13-Bcf five-year-average drawdown.

Warmer weather for the week to April 1 that generated heating degree days that were 5.7% fewer than in the prior year and 18.9% fewer than normal, according to degree day data from the National Oceanic and Atmospheric Administration, is seen to have allowed for the reported storage figure.

Natural gas could be allowed to flow more freely into underground storage facilities to signal an uptick in the pace of inventory-building in the subsequent weeks, as weather forecasts reflect additional warming likely to keep heating demand deflated ahead of any significant bump-up in cooling load.

Revised National Weather Service projections for both the six- to 10-day and eight- to 14-day periods show above-average temperatures enveloping nearly all of the country's eastern two-thirds and the bulk of the Rockies. Average to below-average temperatures settle over a small area encompassing parts of New York, Pennsylvania, Ohio and Michigan in the shorter-range view but shift in scope to the upper tier of the Northeast in the longer-range period, while holding over about half of the West through both periods.

A cooldown over the Northeast in the longer-range outlook could allow for some heating demand, but warming dominant across the country should limit any weather-related demand support and encourage ongoing storage-building.

In cash trading, mixed weather and demand expectations drove choppy price action for natural gas booked Thursday for Friday flow.

Looking at the major delivery locations, a near 6-cent gain steered Transco Zone 6 NY day-ahead gas price activity to an index at $3.185/MMBtu, as a 1-cent uptick nudged benchmark Henry Hub spot gas pricing to an average at $3.233/MMBtu. By contrast, a better-than-10-cent decline drove Chicago next-day gas price action to an index at $3.126/MMBtu, as an almost 3-cent reduction took PG&E Gate hub pricing to an average at $3.359/MMBtu.

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Regionally, Northeast cash gas price action logged a near 2-cent increase in deals averaging at $3.329/MMBtu, as Gulf Coast next-day gas prices clawed up by around 1 cent on average to an index at $3.155/MMBtu. Conversely, Midwest day-ahead gas pricing unraveled roughly 3 cents on the session to average at $3.043/MMBtu, as West Coast spot gas price activity faltered by about 4 cents to an index at $2.800/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.