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May natural gas ends slightly negative on fundamental weakening

NYMEX May natural gas futures finished slightly lower Friday, March 31, as early efforts higher failed to hold amid a backdrop of weakening fundamentals, but with revisions to midrange weather forecasts driving some support back into the market. The contract posted early gains to a $3.242/MMBtu high, but reversed to a post a $3.163/MMBtu low and settled the week's closing session 0.1 cent lower at $3.190/MMBtu.

A shrinking of the closely monitored year-on-five-year average surplus to 250 Bcf, after the U.S. Energy Information Administration reported a slightly smaller than anticipated 43-Bcf withdrawal from stocks for the week to March 24, stoked market gains.

The total working gas supply of 2,049 Bcf left after the withdrawal, however, is expected to be the end-of-withdrawal season total, as analysts and traders look for a storage injection in data that will cover the current week to March 31, which marks the titular end of withdrawal season.

Market participants typically look at end-of-March natural gas inventories as a gauge for prices with a limited end-of-season inventory supporting gains and heavy amounts of storage signaling losses, as the market anticipates the ability to rebuild supplies sufficiently through the shoulder season to a level sufficient to meet anticipated winter demand.

At 2.05 Tcf, the working gas supply falls within the range of storage levels seen over the last five years analysts with Mizuho Securities USA Inc. said in a March 31 equity research report, "Not dramatically high by historical standards, and should not be a concern to investors," the analysts said.

Weather outlooks longer-range suggest demand will continue to erode as the calendar moves deeper into spring, but midrange forecast revisions issued later in the day Friday, offered some downside resistance as cooler weather is now forecast for major heat consuming regions.

The six- to 10-day projection from the National Weather Service shows that average temperatures, rather than above-average temperatures in previous forecasts, will dominate the eastern U.S., a portion of the central U.S and an area of the Northwest. Above-average temperatures will grip the remainder of the country.

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For the eight- to 14-day period, the Northeast and a portion of the mid-Atlantic as well as a small area in the West will see average temperatures. Below-average temperatures will grip a portion of the West, and above-average temperatures will grip the remaining portions of the country.

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Weather as forecast could keep some heating demand in play. While analysts and traders looking ahead to the forthcoming inventory report for the current week to March 31 anticipate a build to stocks in the lower teens, cooler weather could cap additional injections through the early part of the shoulder season.

In day-ahead trade deals for Saturday-through-Monday, delivery was done mostly higher at major delivery hubs as demand outlooks remained supportive despite weekend-day inclusion.

Having posted impressive gains in previous sessions, trades at the Transco Zone 6 NY hub corrected lower against the wider uptrend. Deals were about 5 cents lower to an index near $2.90. At Tetco-M3, a gain of about 1 cent brought the index on par with Transco Zone 6.

Adding more than 1 cent, deals at the Henry Hub found an average near $3.10, Waha added nearly 5 cents to an index atop $2.75, but Chicago went against the broader trend, sinking about 5 cents to an index near $2.95. At the SoCal Border, deals averaged near $2.75 with a gain of more than 1 cent, while PG&E Gate activity averaged atop $3.20 with a gain of about 1 cent.

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.