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May gas futures slump amid bearish storage, weather prospects

After climbing by 16.5 cents on Tuesday to settle at $3.293/MMBtu, NYMEX May natural gas futures pulled back overnight ahead of the Wednesday, April 5, open, as traders considered expectations for the early start of the injection season and a warming trend in forecasts that should dampen demand and allow for a ramp up in the pace of storage-building. At 7:11 a.m. ET (1111 GMT) the contract was 2.3 cents lower at $3.269/MMBtu after trading at a range of $3.267/MMBtu to $3.295/MMBtu.

Natural gas inventories are expected to have begun the injection season a week in advance, as preliminary estimates for the forthcoming storage report due out from the U.S. Energy Information Administration at 10:30 a.m. ET on Thursday, April 6, call for a single-digit build to stocks of around 8 Bcf to 9 Bcf for the review week to March 31, which marks the end of the titular withdrawal season. This would compare to a 13-Bcf five-year-average drawdown and a 6-Bcf injection seen in the corresponding week in 2016.

Total working gas stocks currently sit at 2,049 Bcf, or 423 Bcf below the year-ago level and 250 Bcf above the five-year average of 1,799 Bcf, following a 43-Bcf drawdown during the week ended March 24.

A storage injection to close out March would bring overall inventories atop 2.05 Tcf, still below the year-ago level but above the five-year average.

Weather projections reflecting a warming trend that should erase lingering heating demand ahead of a bump up in cooling load spell an uptick in the rate of weekly storage builds in the coming weeks.

The National Weather Service sees above-average temperatures over the entire East, most of the central U.S. and a small patch of the Southwest in the upcoming six- to 10-day period spilling into all of the central U.S and a large section of the West to ultimately dominate the country further out to the eight- to 14-day period. Average to below-average temperatures encompassing the balance of the central U.S. and a majority of the West in the shorter-range view shrink in scope to be contained to less of the West in the longer-range forecast.

Subdued demand absent weather support should allow for natural gas to flow more freely into underground storage facilities.

At the cash markets, the anticipation of cooler weather at midweek encouraged the upside to prevail in price action for natural gas booked Tuesday for Wednesday flow.

Across the key hubs, the charge higher was led by Chicago day-ahead gas price activity that added roughly 16 cents on the session to average at $3.151/MMBtu. Transco Zone 6 NY hub action followed with a near 6-cent gain in trades averaging at $2.919/MMBtu, then PG&E Gate next-day gas prices that rose by almost 5 cents on average to an index at $3.289/MMBtu and benchmark Henry Hub spot gas pricing that advanced by about 1 cent to an index at $3.064/MMBtu.

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On a regional basis, Midwest cash gas price action logged an almost 8-cent increase in deals averaging at $2.964/MMBtu, as Northeast and West Coast spot gas prices climbed by about 5 cents on average to indexes at $3.242/MMBtu and $2.734/MMBtu, respectively. Gulf Coast day-ahead gas pricing was lifted by nearly 7 cents to an index at $3.015/MMBtu.

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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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.