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May gas futures continue to unravel ahead of storage report

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May gas futures continue to unravel ahead of storage report

Afterending the prior session down 4.3 cents at $1.911/MMBtu, May natural gasfutures remained weak overnight ahead of the Thursday, April 7, open, and themidmorning release of the weekly inventory report, amid ongoing bearish signalsfrom weather and storage expectations. Slipping to a $1.892/MMBtu low, thecontract was last eyed 1.3 cents lower at $1.898/MMBtu.

Overallnatural gas storage levels remain on a path to set a new end-of-season record highwhen the U.S. Energy Information Administration releases it next storage reportat 10:30 a.m. ET on Thursday covering the last week of the titular withdrawalseason.

culled from a surveyof traders and analysts for the forthcoming storage data that will cover theweek to April 1 suggest an injection to stocks from 1 Bcf to as much as 15 Bcf,with consensus formed at an 8-Bcf build. This will compare against a 19-Bcffive-year-average withdrawal and a 6-Bcf build seen in the corresponding weekin 2015.

Theweek's data would follow a net 25-Bcf pull from storage reported for the week to March25 that took overall inventories to 2,468 Bcf, or 1,002 Bcf above the year-agolevel and 843 Bcf above the five-year average of 1,625 Bcf.

Anaddition to stocks at the consensus figure would drive total stocks to 2,476Bcf, exceeding the previous end-of-season record high of 2,473 Bcf reached onMarch 31, 2012. The year-on-year surplus would slightly expand to 1,004 Bcf andthe year-on-five-year average surplus would widen to 870 Bcf.

Goingforward, natural gas inventories are expected to remain more than adequate andkeep downside pressure on values, as moderating weather in store as the springshoulder season unfolds looks to sap demand and halt storage withdrawals aheadof any significant demand for cooling in the summer.

TheNational Weather Service sees below-average temperatures gripping the bulk ofthe Northeast, Mid-Atlantic and Midwest, as well as the fringes of Southeastand much of the Southwest in the upcoming six- to 10-day period. Above-averagetemperatures are called for the Northwest, a small section of the Midwest, thelower tier of the Gulf Coast and parts of the Southeast, while averagetemperatures are forecast for the remainder of the country.

Below-averagetemperatures exit the East but linger over a majority of the Southwest in theeight- to 14-day period, as above-average temperatures shrink in scope in theNorthwest to settle only over the upper tier of the region but overtake thebulk of the country's eastern two-thirds. Average temperatures settle over theNortheast, the upper half of the Mid-Atlantic, the balance of the central U.S.and parts of the West.

Milderweather spells subdued demand ahead that should allow for the onset of a streamof storage injections that would augment already healthy inventories.

Atthe cash markets, the combined pressure of easing weather-related demandsupport and steadily declining futures encouraged losses to prevail in priceactivity for day-ahead natural gas Wednesday.

Acrossthe major hubs, the most significant decline was a near 29-cent decrease thattook Transco Zone 6 NY spot gas pricing to an index at $1.841/MMBtu. This wasfollowed by a downdraft of about 4 cents that steered Chicago next-day gasprice action to an index at $1.922/MMBtu, then by a 2-cent slump that nudgedPG&E Gate hub activity to an index at $1.904/MMBtu and a near 1-centreduction that drove benchmark Henry Hub cash gas pricing to an index at$1.909/MMBtu.

Regionally,Northeast day-ahead gas price activity deflated by 53 cents in deals averagingat $1.937/MMBtu, as Midwest and Gulf Coast cash gas pricing floundered byaround 2 cents on average to indexes at $1.823/MMBtu and $1.813/MMBtu,respectively. West Coast spot gas price action shed a little more than 1 centon the session to average at $1.614/MMBtu.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.