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April natural gas extends gains ahead of contract expiration

After advancing 2.7 cents to settle at $2.618/MMBtu in the week's opening session, NYMEX April natural gas futures remained buoyed by the implications of recent and projected cold in overnight trade ahead of the Tuesday, March 27, open and the contract's roll off the board at the close of business. At 6:55 a.m. ET, the contract was 3.2 cents higher at $2.650/MMBtu.

Lingering cold of late is expected to have driven a better-than-average rate of weekly storage withdrawals in the forthcoming inventory data due out March 29 from the U.S. Energy Information Administration, despite higher low temperatures associated with the arrival of spring.

Market participants looking to the upcoming storage report that will cover the week ended March 23 call for draws from stocks in the upper 60s Bcf to the low 70s Bcf, which would exceed the 46-Bcf five-year-average withdrawal and a 58-Bcf year-ago pull.

Working natural gas in storage currently stands at a total of 1,446 Bcf, or 667 Bcf below the year-ago level and 329 Bcf below the five-year average of 1,775 Bcf, after the EIA outlined an 86-Bcf drawdown for the week ended March 16.

Approaching the traditional end of the withdrawal season March 31, the EIA sees working gas stocks ending the season 19% lower than the five-year average at 1,373 Bcf, assuming storage draws match the five-year average for the remainder of the season.

Additional cold over major heat-consuming regions in midrange projections looks to drive heating demand, likely to extend storage erosion into early April.

The latest National Weather Service outlooks show below-average temperatures enveloping the Northeast, mid-Atlantic, Midwest, the upper portions of the South and parts of the Northwest through both the upcoming six- to 10-day and eight- to 14-day periods, as average to above-average temperatures settle over the balance of the South and most of the West.

Longer-range fundamentals limit the upside, however, as a projected warming trend seen erasing heating demand ahead of the onset of cooling load combined with a growing rig count that implies production gains look to drive the natural gas supply back higher ahead of the next peak demand period.

The Weather Company sees warmer-than-normal weather over the southern tier of the U.S. in April through June, while the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country over the same period.

The total U.S. rig count climbed by five to 995 during the week ended March 23, as oil rigs rose by four on the week and gas rigs increased by one, according to the latest North America Rotary Rig Count.

The price of natural gas booked Monday for Tuesday flow was mixed with a dominant downside bias amid pressure from mostly declining demand outlooks.

Looking at the key hubs, a near 11-cent decrease steered Transco Zone 6 NY next-day gas pricing to an index at $2.700/MMBtu, as a roughly 4-cent slump took Chicago spot gas price action to an average at $2.384/MMBtu. By contrast, an almost 5-cent gain drove benchmark Henry Hub cash gas price activity to an average at $2.625/MMBtu, as an approximate 2-cent uptick brought PG&E Gate hub pricing to an index at $2.557/MMBtu.

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Regional averages deflated overall. Day-ahead gas prices in the Northeast fell by about 11 cents on average to an index at $2.517/MMBtu, as Midwest cash gas pricing logged a scant less-than-1-cent reduction in deals averaging at $2.189/MMBtu. Gulf Coast next-day gas price action eased by roughly 1 cent to an index at $2.512/MMBtu, as spot gas price activity in the West shed nearly 2 cents on the session to average at $1.911/MMBtu.

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