NYMEX April natural gas surged ahead of expiration at the close of business Wednesday, March 29, in short covering, drawing modest support from still declining natural gas inventories and revised weather forecasts that were slightly less bearish in the mid-term. Changing hands from $3.082/MMBtu to $3.183/MMBtu, April futures settled 7.9 cents higher on the day at near-six-week high of $3.175/MMBtu.
April futures followed the soon-to-be-lead May contract, which moved from $3.161/MMBtu to $3.253/MMBtu before settling 5.4 cents higher on the day at $3.231/MMBtu.
Short covering drove the upside as traders took stock of the natural gas supply that will end the withdrawal season at a deficit to the year-ago level. Inventories are at 2,092 Bcf, or 399 Bcf below the year-ago level and 266 Bcf above the five-year average storage level of 1,826 Bcf, after a 150-Bcf withdrawal in the week to March 17.
The supply is expected to be further trimmed and the deficit to the year-ago level will widen as outlooks for the March 30 inventory report from the U.S. Energy Information Administration suggest pulls for the week to March 24 ranged from 32 Bcf to 55 Bcf, with consensus formed at a pull of 44 Bcf.
The pull would compare against a 27-Bcf five-year-average withdrawal and the 19-Bcf drawdown reported in the corresponding week in 2016. Natural gas inventories would fall to 2,048 Bcf, which would widen the year-on-year deficit to 424 Bcf, while the year-on-five-year-average surplus would be trimmed to 249 Bcf.
This tightening helped support the upside despite weather forecast revisions Wednesday that show no significant change from the prior outlook.
Forecasts from the National Weather Service for the six- to 10-day and eight- to 14-day periods outline expectations for above-average temperatures across the majority of the country, with only small areas in the Northwest and Northeast expected to see average temperatures in the near term, and with the majority of the West expected to see average and below-average temperatures further out.
The mild weather particularly in the Northeast should cap demand for heating and turn weekly natural gas storage withdrawals to weekly injections beginning as early as the week to March 31.
In day-ahead trade demand expectations supported an uptick in pricing for natural gas slated for Thursday delivery to major hubs across the country. Natural gas futures gains may have provided additional upside support.
Transco Zone 6 NY added nearly 15 cents to the prior-day average, driving the index to near $2.95, and Tetco-M3 advanced similarly to an index near $2.90. Henry Hub traded about 10 cents higher to an index near $3.05, Waha deals were more than 5 cents higher to an index near $2.75 and Chicago gained about 10 cents to an index near $3.05. At the SoCal Border, trades were about 10 cents higher to an index near $2.75, while PG&E Gate jumped about 5 cents to an index near $3.20.
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, natural gas index prices, as well as forwards and futures, visit our Commodities pages.