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May natural gas futures surge as supply trails year-ago level

May natural gas futures were sharply higher Tuesday, April 4, reaching a level not seen since late January. The contract settled 16.5 cents higher at $3.293/MMBtu, after trading a range from $3.121/MMBtu to $3.301/MMBtu.

The total working natural gas supply is expected to have begun the injection season a week early, with outlooks calling for a modest build to stocks when the U.S. Energy Information Administration releases its latest storage report at 10:30 a.m. ET on Thursday, April 6, covering data for the week to March 31.

March 31 marked the titular end of withdrawal season, and outlooks show the EIA is likely to outline a single-digit build to stocks of around 8 Bcf to 9 Bcf, compared against a 13-Bcf five-year-average storage pull and the 6-Bcf injection reported for the same week in 2016.

Inventories currently sit at 2,049 Bcf, after a 43-Bcf withdrawal in the week to March 24, and with a build in the week to March 31, inventories will end the withdrawal season atop 2.05 Tcf, above the five-year average level but well below the level at the start of injection season in 2016.

Near-term weather outlooks support additional storage builds, but revisions to midrange weather forecasts suggest a slow rate of improvement to the total working gas supply in the starting weeks of the shoulder season.

For the six- to 10-day period, the National Weather Service sees above-average temperatures blanketing the eastern half of the U.S., while a band of average temperatures separates the above-average reading in the East from below-average temperatures that dominate in the West.

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Mild weather in the East should cap demand and help drive inventory injections, but the eight- to 14-day outlook shows only a little more than the eastern third of the U.S. engulfed by less intense above-average temperatures, while the majority of the remaining U.S. will see average temperatures. A small patch of below-average temperatures are forecast for an area in the west-central U.S.

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Further, natural gas production decline and consumption gains driven by LNG exports and pipeline exports to Mexico are expected to drive an imbalance and an end-of-injection-season inventory of around 3.6 Tcf, 5.3% below the five-year average, according to FX Empire analyst David Becker.

A cooldown forecast for midweek drove price support into the day-ahead markets as prices for Wednesday product moved higher at most major delivery locations.

Transco Zone 6 NY trades averaged near $2.95 with a gain of more than 5 cents, Tetco-M3 gained nearly 10 cents to an index atop $2.90, benchmark Henry Hub trades were more than 1 cent higher to an index near $3.10, Waha added nearly 5 cents to average near $2.85 and Chicago gained about 15 cents to an index near $3.15. In the West, SoCal Border and PG&E Gate each gained about 5 cents to indexes atop $2.85 and near $3.30, respectively.

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.