After reaching as low as $2.53/MMBtu in the previous week, NYMEX March natural gas futures reversed early session losses and built upon previous-day gains Wednesday, Feb. 21, as oversold conditions triggered some bargain buying and short covering ahead of the release of weekly inventory data on Feb. 22.
Ahead of the expiration of March natural gas options at the close of business Feb. 23 and the expiration of the March futures contract Feb. 26, March natural gas ended the Feb. 21 session up 4.3 cents at $2.659/MMBtu. The April contract ended 3.2 cents higher at $2.681/MMBtu.
Buying was encouraged by the Feb. 22 release of weekly storage data from the U.S. Energy Information Administration, which is expected to show a withdrawal of 116 Bcf for the week ended Feb. 16, compared to a 92-Bcf year-ago pull and the 145-Bcf five-year-average withdrawal. A survey of traders and analysts revealed a range of estimates from 105 Bcf to 128 Bcf.
At 1,884 Bcf, total working natural gas inventories are currently 577 Bcf below the year-ago level and 433 Bcf below the five-year average of 2,317 Bcf. Assuming net withdrawals match the five-year average for the remainder of the heating season, the EIA sees stocks ending the traditional withdrawal season on March 31 at 1,269 Bcf, which would be 25% lower than the five-year average and the second-lowest end-of-season level reported since 2010.
However, lingering cold in forecasts could allow for weekly storage withdrawals to pick up pace anew, supporting outlooks for a significantly diminished end-of-heating-season inventory level.
National Weather Service forecasts show below-average temperatures over nearly the entire West and a few areas of the Plains in the six- to 10-day period with the eastern half of the U.S. looking at above-average temperatures. The eight- to 14-day outlook points to normal conditions across much of Texas, the Midwest and the eastern U.S. as above-average readings are contained to the Southeast and extreme Northeast and below-average temperatures in the West spread further into the Plains.
With the peak of the winter heating season already past, seasonable to colder-than-normal weather is not expected to generate frigid conditions but could still bring late-season heating demand that would encourage storage withdrawals.
The longer-range outlook from The Weather Company calls for colder-than-normal conditions for the northern half of the U.S. in the March-through-May period, accompanied by warmer-than-normal weather across the southern half.
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