April natural gas futures advanced Thursday, March 1, as weather-related demand and a storage withdrawal slightly above outlooks and well above the year-ago level inspired short-covering gains. The contract settled 3.1 cents higher at $2.698/MMBtu.
A delay in the release of the storage figure prompted the front-month contract to jump to a $2.731/MMBtu high that gave way as the figure showed a drawdown that was well below the five-year average.
The U.S. Energy Information Administration reported a net 78-Bcf withdrawal from natural gas inventories in the Lower 48 during the week ended Feb. 23 that was slightly higher than expectations for a 75-Bcf drawdown. The pull was well above the 7-Bcf year-ago withdrawal but was well below the 118-Bcf five-year-average draw.
The pull brought total U.S. working gas supply to 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. Milder weather in the week to Feb. 21 drove a sizable 14% week-on-week decrease in total natural gas consumption that was helped by residential/commercial-sector demand that was down 24% week on week.
"Next week's report is likely to show a below normal injection level as the weather has been mild for most of this week in the main natural gas consuming regions of the country," Energy Management Institute principal Dominick Chirichella said.
However, storage erosion could accelerate in subsequent weeks as weather outlooks point to the return of below-average temperatures that could push demand for heating back higher.
The National Weather Service's updated outlook for the six- to 10-day period shows below-average temperatures spanning a large section of the West, a majority of the Midwest, the lower tier of the mid-Atlantic, portions of the Gulf Coast and nearly the entire Southeast as average to above-average temperatures settle over much of the northeastern quadrant of the U.S. and portions of the Southwest into the Gulf Coast.
In the eight- to 14-day projection, below-average temperatures recede and include only parts of the Southeast, Gulf Goact and West Coast, while average to above-average temperatures encompass the Northeast, much of the mid-Atlantic and Midwest, the entire central U.S., most of the Gulf Coast, southern Florida and the remainder of the Southwest.
While the cooldown could inspire an uptick in heating demand, market participants are considering the calendar and the higher low temperatures associated with the transition from winter to spring. Gains are expected to be short lived as the market enters the shoulder season.
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