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May natural gas slumps amid salubrious supply

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May natural gas slumps amid salubrious supply

Maynatural gas futures traded on both sides of the prior-day settle of$1.959/MMBtu, but finished the week's closing session lower by 0.3 cent at$1.956/MMBtu, pressured by the total working natural gas supply and theimminent arrival of milder weather.

Untilthe supply/demand balance tightens, the hefty natural gas inventory willcontinue to sway the market lower as weather forecasts suggest some lingeringheating demand before overall demand erosion begins to support steady weekly storageinjections.

Thenatural gas supply remains a key linchpin for price recovery amid a storagelevel that could exceed the previous end-of-season record high of 2,473 Bcfreached on March 31, 2012. Storagesits at 2,468 Bcf, or 1,002 Bcf above the year-ago level and 843 Bcf above thefive-year average storage level of 1,625 Bcf, and market outlooks in advance ofthe next storage data release April 7 suggest a build for the final week of thetitular withdrawal season.

Analystsand traders taking an early look at the storage report for the week to April 1see builds spanning 6 Bcf to 13 Bcf, which would compare against a 19-Bcffive-year-average pull and a 6-Bcf injection reported in the corresponding weekin 2015.

Thelatest revisions to weather forecasts imply a brief return to storagewithdrawals in the week to April 8 before a steady stream of storage injectionsonce again work the total gas supply higher through the spring shoulder season.

Themarket continues to garner support from lingering cold weather in forecaststhrough early April, with the National Oceanic and Atmospheric Administrationcalling for below-average temperatures across the eastern third of the countryin the six- to 10-day period, a swath of average temperatures across a portionof the central U.S. and above-average temperatures spanning from the West intothe central U.S.

Bymid-April, the eight- to 14-day outlook shows moderate warming in the East, butstill the predominance of below-average temperatures, with only portions ofMaine and New Hampshire in the Northeast, and Florida in the Southeast, joiningan area of the central U.S. under average temperatures. The West into thecentral U.S. will continue to experience above-average temperatures.

Lingeringcold in the near term supports some ongoing heating demand that continues toprovide some upside potential for the market. Otherwise, the steady warming tomilder spring conditions should begin to sap heating demand ahead of the onsetof cooling load and continue to pull that support from the market.

Weather supports Northeastday-ahead trade; values retreat elsewhere

Coldweather expected through the weekend from April 2 through April 4 providedsupport for day-ahead prices at Northeast delivery locations, while the weekendinclusion and milder weather elsewhere in the country drove price decline forthe Saturday through Monday package.

Anotherspurt of cold weather in the Northeast supported gains of more than 10 cents atIroquois-Waddington, situated at the Canadian border, with the index markednear $2.10, while Tetco-M3 trades were higher by about 25 cents, driving theindex to near $1.50. At Transco Zone 6 NY, a more than 40-cent gain brought theaverage there to better than $1.70.

Weekendinclusion and weather-implied demand erosion for the bulk of the country andmarkets responded with losses. Henry Hub deals were down about 5 cents to anindex nearing $1.85, while similar losses at Col Gulf Mainline drove the indexthere to around $1.80. FGT Zone 3 gave back 10 cents on average, driving theindex close to the benchmark Henry Hub value. Waha trades averaged below $1.70,shedding nearly 15 cents on the session, while mild weather in the Midwestsupported a decline of about 5 cents at Chicago Citygates, where deals averagedbeneath $1.90. In the Rockies and across the West, losses of more than 10 centswere reported. CIG deals averaged near $1.50 while SoCal Border found itsaverage below $1.70. PG&E Gate tripped to an index near $1.85 and Malintrades averaged around $1.60.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.