April natural gas extended gains Wednesday, March 7, as traders await the next major catalyst for prices, storage data for the week to March 2, while weather outlooks point to returning cold that could bump up heating demand. The contract settled with a 2.8-cents gain at $2.777/MMBtu, while trading a range from $2.744/MMBtu to $2.788/MMBtu.
Market participants are poised for the release of the latest storage data from the U.S. Energy Information Administration that will cover the week ended March 2 and is expected to show a withdrawal from stocks near the 57-Bcf pull reported for the same week in 2017 and well below the 129-Bcf five-year average draw.
Industry experts surveyed expect a withdrawal from stocks ranged from 55 Bcf to 61 Bcf, with consensus at a 58-Bcf pull for the week that saw 5.3% fewer heating degree days compared to last year and 18.2% fewer than normal.
Weather is a key driver of demand and heating demand has been easing as temperatures moderate.
In the latest "Natural Gas Weekly Update" the EIA said after a 14% decline in total U.S. consumption of natural gas for the week ended Feb. 21, total consumption was unchanged, averaging 75.0 Bcf/d in the week to Feb. 28. Natural gas consumed for power generation climbed 4% week over week, industrial sector consumption was steady at a 21.8 Bcf/d average, and residential and commercial sectors consumption declined by 2% after sinking 24% the week prior.
Total natural gas inventories currently sit at 1,682 Bcf, or 680 Bcf below the year-ago level and 372 Bcf below the five-year average storage level of 2,054 Bcf, after a 78-Bcf drawdown reported for the week ended Feb. 23.
A pull at this week's consensus expectation would send the total supply to 1,624 Bcf and would widen slightly the deficit to last year to 681 Bcf but would trim the year-on-five-year-average deficit to 301 Bcf.
Weather forecasts portend a possible boost in demand and larger storage withdrawals in subsequent weeks as colder conditions are expected.
The six- to 10-day outlook from the National Weather Service shows average and below-average temperatures spanning nearly the entire eastern half of the country and overtaking portions of the north central and about half of the West. Above-average temperatures are forecast for portions of the central U.S. and West Coast.
For the eight- to 14-day period, the NWS sees a wider area of above-average temperatures across the Central, Gulf, Midwest and in a portion of Maine, while predominantly average temperatures span the eastern quarter of the country. Small areas of the mid-Atlantic and Southeast join the majority of the western half of the country under below-average temperatures.
Despite the cold, upside support is limited as the market takes note of the changing weather patterns from winter to spring. Higher low temperatures associated with the transitioning of the seasons should limit heating demand.
Natural gas inventories are on pace to end the withdrawal season below the five-year average and at the second lowest level since 2010. The EIA sees supply at 1,330 Bcf by the traditional end of withdrawal season on March 31, if net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season.
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