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March natural gas buoyed by technical buying but remains in the red

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March natural gas buoyed by technical buying but remains in the red

Following a 1.0-cent slump to a finish at $2.846/MMBtu ahead of the weekend, NYMEX March natural gas futures attempted to trade in shallow positive territory overnight leading up to the Monday, Feb. 5, open, as technical buying ran against fundamental pressure. However, the market ultimately turned lower again. At 7 a.m. ET (1200 GMT) the contract was 1.0 cent lower at $2.836/MMBtu.

After the March contract logged a net 32.1-cent loss since pulling into the lead slot on Jan. 30, sentiment of oversold conditions inspired a round of buying in the futures market overnight, but the upside remains limited amid fundamental weakness implied by recent and projected lackluster weather-related demand.

Natural gas demand ended January on a weak note amid generally warmer weather, with the U.S. Energy Information Administration's latest "Natural Gas Weekly Update" for the week ended Jan. 31 detailing a 2% week-over-week decrease in total U.S. gas consumption. Dry production was up 1% over the same period.

Elevated production alongside diminished demand during the week in review should limit the amount of natural gas drawn from underground storage facilities when the next weekly inventory report is released that will cover the week to Feb. 2, allowing for a continuation of the recent slow pace of stock erosion.

Natural gas inventories notched a modest 99-Bcf draw in the week ended Jan. 26, which trailed both the average anticipated 102-Bcf draw and the 160-Bcf five-year average pull, even as it bested the 92-Bcf year-ago drawdown. Total working gas stocks currently sit at 2,197 Bcf, or 526 Bcf below the year-ago level and 425 Bcf below the five-year average of 2,622 Bcf.

Weather contributed to the smaller storage withdrawal as degree day data from the National Oceanic and Atmospheric Administration for the week ended Jan. 27 show heating degree days were 25.1% lower than normal.

Moderating weather in store in the midrange looks to keep downside pressure on demand levels, likely to encourage the slow rate of weekly storage draws going forward.

The latest National Weather Service forecast for the six- to 10-day period shows above-average temperatures over much of the East Coast into the interior of the Southeast and a large area of the West flanking an area of average to mostly below-average temperatures encompassing the balance of the West, a majority of the central U.S. and the remainder of the East.

Above-average temperatures overtake the bulk of the country's eastern third, parts of the Midwest, nearly the entire West and fringes of the Gulf Coast in the eight- to 14-day outlook, as below-average temperatures shrink in scope to be contained to southern Texas. Average temperatures settle over parts of the northern Rockies and most of the central U.S.

End-of-season inventories will be helped by storage pulls that trail the five-year averages for the remainder of the withdrawal season.

The natural gas offering at the spot markets on Feb. 2 was revised for Saturday-through-Monday flow and moved at reduced values in much of the country amid pressure from the typical weekend inclusion in the package.

Among the key hubs, Transco Zone 6 NY cash gas prices led the charge lower with a roughly $4.11 decline on average to an index at $4.460/MMBtu. PG&E Gate next-day gas pricing followed with an approximate 21-cent slump in transactions averaging at $2.475/MMBtu, then benchmark Henry Hub day-ahead gas price action that shed almost 15 cents on the day to average $2.912/MMBtu and Chicago hub activity that faltered by about 13 cents to an index at $2.750/MMBtu.

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On a regional basis, Northeast spot gas pricing unraveled nearly $1.59 on the day to average $4.020/MMBtu, while West Coast day-ahead gas price activity logged an almost 35-cent decrease in trades averaging at $1.897/MMBtu. Gulf Coast next-day gas price action fell by around 28 cents to an index at $2.808/MMBtu, as Midwest cash gas prices eased roughly 15 cents on average to an index at $2.539/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.