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Book squaring drives natural gas futures higher to end week


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Book squaring drives natural gas futures higher to end week

Junenatural gas futures traded on either side of unchanged in the week's closingsession Friday, May 6, as participants mull market signals that imply near-termweakness and longer-range strength. At the close, the contract was higher by2.5 cents in pre-weekend book squaring, settling at $2.101/MMBtu.

Weatherforecasts remain supportive of weak demand through the midrange period. TheNational Oceanic and Atmospheric Administration's six- to 10-day and eight- to 14-daymaps show above-average temperatures in the East and West and below-averagetemperatures across the country's midsection.

Asforecast, the weather would provide little in the way of demand support, as thecall for heat is erased by warming, and cooling demand is kept at bay by springtemperatures ahead of summer heat.

"Withthe moderate temperature outlook likely to translate into near average storagewithdrawals over the next few weeks, we wouldn't rule out further sidewaysprice chop over the coming week or two," Citi Futures analyst Tim Evanssaid in a note.

Naturalgas inventories are on the rise, but the pace of storage injections is belowthat of the previous year. U.S. Energy Information Administration storage dataoutlined a build of 68 Bcffor the week to April 29 that compared against a 77-Bcf injection for the sameweek in 2015.

TheEIA said cumulative net injections into working gas total 145 Bcf thus far inthe 2016 refill season, compared with the five-year average of 183 Bcf and lastyear's tally of 292 Bcf during the same period. Stocks still remain near recordhighs for this time of year, and that level of supply remains a weight onnatural gas values.

Whilenear-term fundamentals continue to anchor the market to the downside, there issome underlying concern that a slowdown in supply growth ahead of a summerexpected to be warmer than average, could work to tighten the supply/demandbalance driving some upside support for values.

"There'stalk of moderating supply growth and rising overall demand as backgroundsupports, but we don't see a more urgent reason to buy," Evans said.

Themix of fundamentals are likely to continue supporting additional attemptshigher answered by renewed bouts of selling as the market attempts to findcomfortable ground.

Demandprojections for the three-day period from May 7 through May 9 point lower as aresult of the weekend and weather, and drove losses in the day-ahead market inFriday trade for the three-day product.

AtTransco Zone 6 NY, trades were about 40 cents lower to an index below $1.45.The market at Teto-M3 was penned near $1.40, lower by about 10 cents. At theCanadian border, deals at Iroquois-Waddington were nearly 10 cents lower to anaverage near $2.20.

Lackingdemand support the benchmark Henry Hub traded about 20 cents lower to an indexaround $1.85, while the market at Waha was about 20 cents lower and near $1.70.At the Chicago hub, deals averaged below $1.90, lower by more than 10 cents,while CIG trades were similarly lower and averaged around $1.65. In the West,SoCal Border trades tumbled about 25 cents to an index below $1.75, whilePG&E Gate traded about 15 cents lower to an index around $1.95.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.