March natural gas futures turned higher at midweek Wednesday, Feb. 1, with buying triggered at the lows. The contract touched a $3.113/MMBtu low in overnight trade that triggered buying to a $3.228/MMBtu intraday high and a settlement up 5.1 cents at $3.168/MMBtu.
Gains came with some modest fundamental support behind them, as the latest weather forecasts from the National Oceanic and Atmospheric Administration show below-average temperatures returning to major heat-consuming portions of the U.S. through the six- to 10-day and eight- to 14-day periods.
Cold weather in the Northeast and Midwest regions suggests a boost in demand for natural gas for heating that would force more natural gas out of underground storage facilities.
The market is watching the level of the natural gas supply, as the withdrawal season thus far has reduced the total working gas inventory to 2,798 Bcf as of the week to Jan. 20, some 348 Bcf below the level during the same week in 2016 and 20 Bcf below the five-year average storage level of 2,818 Bcf.
The withdrawal season thus far saw its largest pull from stocks in the week to Jan. 13, when the U.S. Energy Information Administration reported a 243-Bcf drawdown from stocks, that was the largest single weekly net withdrawal from working gas since the polar vortex event in January 2014.
A week later, as weather warmed particularly in the key consuming regions, natural gas inventories stepped just 119 Bcf lower, according to EIA data for the week to Jan. 20.
Market participants are looking for another step lower when the EIA releases its next report at 10:30 a.m. ET on Feb. 2. A survey of analysts and traders shows expectations for a withdrawal from 77 Bcf to as much as 98 Bcf, with consensus formed at an 87-Bcf withdrawal from stocks. The pull will compare against a 166-Bcf five-year-average draw and the 169-Bcf pull reported for the corresponding week in 2016.
Supporting the outlook, degree-day data from the NOAA shows there were 17.1% fewer heating degree days compared to the same week last year, and 23.4% fewer than normal.
A drawdown at the anticipated amount would drive the total working gas supply to 2,711 Bcf. The deficit to the year-ago level would be trimmed to 266 Bcf and the year-on-five-year-average deficit would shift to a 59-Bcf surplus.
Subsequent data should be impacted by the return to cooler weather and larger pulls from stocks are likely. End-of-season inventories however, are expected to be adequate leading into the shoulder season and the next injection period.
At day-ahead markets, trades were done higher with some gains impressive against a backdrop of rising demand.
Transco Zone 6 NY deals were nearly 40 cents higher on the session to an average near $3.40, Tetco-M3 marched nearly 20 cents higher to an index atop $3.10, Henry Hub traded more than 10 cents higher to an index atop $3.10, Waha advanced similarly to an index near $2.95 and Chicago gained nearly 10 cents to an index near $3.10. In the West, SoCal Border trades were about 5 cents higher on the session to an index near $3.05 while PG&E Gate posted a similar gain to an index near $3.50.
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