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March natural gas expires with modest gain; April gas settles slightly higher

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Essential Energy Insights - November 2021


March natural gas expires with modest gain; April gas settles slightly higher

March natural gas futures settled its final session as the lead contract with a modest short-covering gain, rolling off the board up 1.4 cents at $2.639/MMBtu at the close of trade Monday, Feb. 26.

Set to take the lead position, April futures settled the day with a 2.9-cent gain at $2.686/MMBtu.

Revised weather forecasts offered support as the mild weather at the end of February is forecast to revert to cold to start the new month.

The latest outlook from the National Weather Service shows below-average temperatures encompassing nearly the entire West, fringes of the Midwest and a small patch of the Southeast in the six- to 10-day period before shifting in scope to settle over less but still a majority of the West, slightly more of the Midwest, the lower tier of the mid-Atlantic, all of the Southeast and about half of the Gulf Coast in the eight- to 14-day period.

Average temperatures initially contained to a band in the west-central U.S. and the lower half of the mid-Atlantic into parts of the Southeast eventually scatter to hold over the edges of the Northeast, the balance of the mid-Atlantic, much of the Midwest, parts of the Gulf Coast and a few areas of the Southwest. Above-average temperatures dominate in the central and eastern U.S. in the shorter-range view then become confined to portions of the Northeast, Michigan, Texas and southern Rockies further out.

The return of colder weather could drive larger withdrawals from the natural gas supply as the market looks to end-of-season inventories.

Natural gas inventory erosion slowed following a 194-Bcf pull from stocks reported for the week to Feb. 9, when the U.S. Energy Information Administration reported a net 124-Bcf pull from stocks for the week to Feb. 16.

That pull was at the high end of estimates coming into the day and above the 92-Bcf year-ago pull but was below the closely watched five-year-average draw of 145 Bcf. Stocks stood at 1,760 Bcf after the drawdown, or 609 Bcf below the prior-year level and 412 Bcf below the five-year average of 2,172 Bcf.

A continuation of mild weather in the week to Feb. 23 is expected to bring a more modest withdrawal from stocks, with early estimates in the 70s Bcf, before a return to colder weather ramps up storage drawdowns again.

Longer-range storage withdrawal estimates for the subsequent three weeks are seen peaking only in the lower 80s Bcf compared with five-year average pulls of 129 Bcf for the week to March 2, 97 Bcf for the week to March 9 and a 53-Bcf five-year average withdrawal in the week to March 16. This suggests an adequate inventory of natural gas at the end of the traditional withdrawal season March 31.

The EIA said that assuming net storage draws match the five-year average for the balance of the withdrawal season, total natural gas inventories would reach 1,290 Bcf on March 31, which is 24% lower than the five-year average and the second-lowest end-of-season level reported since 2010.

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.