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May natural gas reverses early gains ahead of storage data

After ending the prior session down 2.7 cents at $3.266/MMBtu, NYMEX May natural gas futures ticked higher overnight, but returned gains ahead of the Thursday, April 6, open in positioning leading up to the midmorning release of the weekly storage data. At 7:12 a.m. ET (1112 GMT) the contract was 0.1 cent lower at $3.265/MMBtu, while trading a range of $3.260/MMBtu to $3.283/MMBtu.

Traders and analysts expect a modest build to stocks for what is typically the final week of the withdrawal season when the U.S. Energy Information Administration releases its weekly inventory report at 10:30 a.m. ET on Thursday, as warming during the review week is seen to have sapped lingering heating demand.

Estimates for the forthcoming storage data that will cover the week to March 31 call for an injection of anywhere from 5 Bcf to 15 Bcf, with consensus formed at a 9-Bcf addition to stocks. This would compare to a 13-Bcf five-year-average drawdown and a 6-Bcf injection seen in the corresponding week in 2016.

Heating degree day data from the National Oceanic and Atmospheric Administration for the week to April 1 show 5.7% fewer heating degree days than in the prior year and 18.9% fewer than normal.

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 that should be the final draw of the withdrawal season.

A storage injection at consensus would bring overall inventories to 2,058 Bcf, shrinking the year-on-year deficit to 420 Bcf and expanding the year-on-five-year-average surplus to 272 Bcf.

A forecast warming trend suggests a further erosion of heating demand ahead of a ramp up in cooling load, which should boost the rate of weekly inventory injections as natural gas production is allowed to flow more freely into underground storage facilities.

The latest National Weather Service outlooks show above-average temperatures stretching from much of the country's eastern two-thirds into most of the West in the upcoming six- to 10-day period, before shifting and expanding in scope to encompass the bulk of the East, the entire central U.S. and a larger area of the West further out to the eight- to 14-day period.

Average temperatures called for portions of the central U.S. and West in the shorter-range view shrink in scope to be contained to the Northeast and along a narrow band in the West in the longer-range period, as below-average temperatures indicated for Washington and a small patch of Texas in the near term become contained to the West Coast further out.

Lackluster weather-related demand through the shoulder season should allow natural gas inventories to rebuild to a healthy level.

In cash action, the price of natural gas for next-day flow was biased higher in much of the country Wednesday, as cooler weather fueled anticipation of stronger demand.

Among the key hubs, the charge to the upside was led by Transco Zone 6 NY day-ahead gas price activity that notched an almost 21-cent increase on the session in deals averaging at $3.126/MMBtu. Benchmark Henry Hub spot gas pricing followed by adding roughly 16 cents on the day to average at $3.223/MMBtu, then PG&E Gate cash gas prices that rose by about 10 cents on average to an index at $3.385/MMBtu and Chicago hub action that advanced by nearly 8 cents to an index at $3.230/MMBtu.

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On a regional basis, Northeast spot gas price action was bolstered by about 7 cents to an index at $3.308/MMBtu, while Gulf Coast next-day gas pricing was lifted by roughly 13 cents as it averaged at $3.149/MMBtu. West Coast and Midwest cash gas prices climbed by around 11 cents on average to indexes at $2.841/MMBtu and $3.076/MMBtu, respectively.

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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.