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April natural gas climbs with weather support as options expire

April natural gas futures reversed early losses Monday, March 26, to finish on the plus side of the ledger as options expired at the close of business and with the April contract set to roll off the board at the March 27 settle. While sinking to a $2.565/MMBtu low, the contract closed 2.7 cents higher at $2.618/MMBtu.

May natural gas settled 2.4 cents higher at $2.657/MMBtu.

Market participants pushed the price of natural gas higher on the presence of lingering cold weather in forecasts through early April that could drive demand and support an end-of-season natural gas inventory that is 19% below the five-year average at 1,373 Bcf.

Natural gas inventories were pulled down to 1,446 Bcf, or 667 Bcf below the year-ago level and 329 Bcf below the five-year average storage level of 1,775 Bcf, after an 86-Bcf withdrawal for the week to March 16.

Cold weather continued into the week to March 23, but the higher low temperatures associated with the arrival of spring kept demand at bay. The U.S. Energy Information Administration reported total U.S. gas consumption was 5% lower in the week to March 21 compared with the previous week, at 76.6 Bcf/d.

Analysts and traders still anticipate a withdrawal from inventories in the next report due out from the EIA at 10:30 a.m. ET on March 29, with outlooks spanning the upper 60s Bcf to the low 70s Bcf, while lingering cold in forecasts could extend storage erosion beyond the traditional end of withdrawal season March 31.

Midrange weather outlooks from the National Weather Service show that for the six- to 10-day and eight- to 14-day periods, below-average temperatures will span the Northeast, mid-Atlantic, Midwest, parts of the Northwest and fringes of the South as average to above-average temperatures settle over a majority of the West and the South.

Minimizing support, weather outlooks for April through June forecast a warming trend. The Weather Company sees warmer-than-normal weather over the southern tier of the U.S., and the National Oceanic and Atmospheric Administration anticipates warmer-than-normal weather over much of the country.

As demand diminishes, rising production could provide additional downside pressure. The EIA reported dry production up 1% week on week at 79.1 Bcf/d, while rig count data implies additional production gains. Data for the week ended March 23 showed the combined oil and natural gas rig count in the U.S. up by five on the week at 995. Oil rigs were up four on the week at 804, and natural gas rigs were up one on the week at 190.

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.