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April natural gas futures extend gains as cold lingers in forecasts

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April natural gas futures extend gains as cold lingers in forecasts

After advancing by 0.9 cent to settle at $2.704/MMBtu in the week's opening session, NYMEX April natural gas futures extended higher overnight ahead of the Tuesday, March 6, open on the back of ongoing albeit limited weather-related demand support. At 7:02 a.m. ET, the contract was 0.7 cent higher at $2.711/MMBtu.

Lingering below-average temperatures readings in midrange projections spell support for heating demand levels in the weeks ahead, likely to be contained, however, by higher low temperatures associated with the seasonal changeover from winter to spring.

The latest National Weather Service outlooks show below-average temperatures spanning the lower fringes of the Northeast, the entire Mid-Atlantic, a few parts of the Midwest, all of the Southeast, half of the Gulf Coast and small patches of the West in the six- to 10-day period, then shifting in scope to encompass most of the West and much of the country's eastern third in the eight- to 14-day period.

Average to above-average temperatures hold over much of the Northeast, a majority of the Midwest, balance of the Gulf Coast and bulk of the West in the shorter-range view, but stretch from parts of the Rockies into most of the central U.S. and the Northeast in the extended period.

"Cold weather in March is nothing like cold weather in January and as such natural gas heating related demand will increase versus normal for this time of the year but it will not be near the levels of normal temperatures in January," Energy Management Institute principal Dominick Chirichella said.

Lackluster weather-driven demand is expected to have kept a lid on the amount of natural gas drawn from underground storage facilities in the most recent and forthcoming inventory reports.

The latest storage data from the U.S. Energy Information Administration outlined a 78-Bcf withdrawal for the week to Feb. 23 that bested the 7-Bcf year-ago drawdown, but significantly trailed the 118-Bcf five-year-average pull. Warmer weather that drove down heating demand is seen to have contributed to the well-below-average inventory draw.

Total working gas stocks were at 1,682 Bcf, or 680 Bcf below the year-ago level and 372 Bcf below the five-year average of 2,054 Bcf.

The EIA's "Natural Gas Weekly Update" for the week to Feb. 28, much of which will be covered in the next storage report, shows that heating demand remained deflated into the close of February as it reflects a 2% week-over-week slump in residential/commercial-sector demand.

Preliminary estimates for the next inventory data that will cover the week ended March 2 call for withdrawals in the upper 50s Bcf, which would still trail a five-year-average drawdown of 129 Bcf.

The price of day-ahead natural gas predominantly favored the upside Monday, in tandem with advancing futures.

Regionally, Northeast spot gas price action added about 14 cents on the session to average at $2.666/MMBtu, as Midwest next-day gas pricing logged a near 9-cent increase in deals averaging $2.421/MMBtu and Gulf Coast cash gas price activity climbed by almost 4 cents to an index at $2.586/MMBtu. Bucking the broad uptrend, West Coast day-ahead gas prices faltered by around 5 cents on average to an index at $2.234/MMBtu.

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Looking at the key hubs, an approximately 10-cent gain steered Transco Zone 6 NY cash gas pricing to an index at $2.770/MMBtu, as an almost 8-cent advance drove Chicago spot gas price activity to an average at $2.489/MMBtu. Benchmark Henry Hub day-ahead gas prices logged a less-than-1-cent uptick on average to ultimately hold near unchanged at an index at $2.703/MMBtu, while PG&E Gate hub action was off about 5 cents at an index at $2.764/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.