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.
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.
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.
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