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March natural gas futures turn positive despite modest storage pull

March natural gas futures failed to extend the downside Thursday, Feb. 2. After maintaining a negative stance into and just beyond the midmorning release of the latest storage data, and despite the report's neutral to bearish implications, the contract traipsed onto the positive side of the ledger and finished there.

The contract found a low at $3.118/MMBtu, but struck a high at $3.209/MMBtu and settled 1.9 cents higher on the session at $3.187/MMBtu.

Weather remains the primary catalyst for market movement and the latest forecasts that show below-average and average temperatures gripping portions of the key heat-consuming Northeast and Midwest markets through mid-February provided enough support for the day's gains.

SNL Image

SNL Image

After milder weather in recent weeks, the colder air should promote stronger heating demand and an increased call on natural gas. Consequently, storage will resume a larger rate of erosion after the most recent pulls demonstrated a steady step down.

The U.S. Energy Information Administration reported a 243-Bcf pull from stocks in the week to Jan. 13, which was the largest weekly withdrawal from inventories since the polar vortex in 2014. Warmer weather in the following week produced a 119-Bcf drawdown that brought the total working gas supply to 2,798 Bcf, or 348 Bcf below the year-ago level and 20 Bcf below the five-year average storage level of 2,818 Bcf.

For the week to Jan. 27, covered in the storage report released at 10:30 a.m. ET on Thursday, data showed just 87-Bcf pulled from stocks as a decline in heating degree days limited the need for natural gas.

The withdrawal was in line with the market consensus ahead of the report's release that called for an 87-Bcf drawdown from stocks, but was below both the 169-Bcf withdrawal reported for the same week in 2016 and the five-year average withdrawal of 166 Bcf.

The drawdown brought the total U.S. working gas supply to 2,711 Bcf and trimmed the storage deficit to the year-ago level to 266 Bcf while reversing the year-on-five-year-average deficit to a surplus of 59 Bcf.

The current storage picture continues to suggest inventories will be ample leading into the next shoulder period, but colder weather in the midrange forecasts could support larger storage withdrawals that offer some threat to the end-of-season supply.

Price direction varied for deals done for natural gas slated for Friday delivery at major hubs across the U.S., as demand outlooks were mixed by weather and commercial and industrial sector load pulling into the weekend.

The advance in price for natural gas moved at the major hubs in the Northeast continued as Transco Zone 6 NY deals added more than 25 cents from prior-day values to an index near $3.70. Tetco-M3 gained more than 10 cents to an index near $3.25. At the Henry Hub, however, the market softened, edging down more than 1 cent to an index below $3.10. Following the hub, Waha and Chicago each gave back more than 1 cent to averages near $2.90 and $3.05, respectively. At major hubs in the West, SoCal Border deals were nearly 10 cents lower on the session to an index below $2.95, while PG&E Gate fell more than 5 cents to an index below $3.45.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.