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April natural gas futures extend lower as bearish fundamentals persist

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April natural gas futures extend lower as bearish fundamentals persist

Following a 1.6-cent retreat to finish at $2.667/MMBtu in the prior session, NYMEX April natural gas futures continued to unwind amid ongoing fundamental pressure overnight ahead of the Thursday, March 1, open and the midmorning release of the weekly storage data. At 6:50 a.m. ET, the contract was 2.1 cents lower at $2.646/MMBtu.

As winter begins to give way to spring, moderating weather that has begun to trim heating demand is expected to drive a substantial slowdown in the pace of storage erosion when the U.S. Energy Information Administration releases its weekly inventory report at 10:30 a.m. ET on Thursday.

Traders and analysts anticipate a drawdown from stocks from 60 Bcf to 82 Bcf for the storage data that will cover the week ended Feb. 23, with consensus pegged at a 75-Bcf pull. That would compare to a 118-Bcf five-year-average withdrawal and a 7-Bcf year-ago draw.

According to the EIA's latest "Natural Gas Weekly Update" for the week to Feb. 21, much of which will be reflected in the upcoming storage report period, warmer weather in the eastern U.S. drove down natural gas demand in the residential/commercial sector, which contributed to a 14% week-on-week decline in total U.S. gas consumption.

The week's data would follow a 124-Bcf drawdown in the week to Feb. 16 that left total working gas stocks at 1,760 Bcf, or 609 Bcf below the year-ago level and 412 Bcf below the five-year average of 2,172 Bcf.

Natural gas inventories are expected to reach the second-lowest end-of-withdrawal-season level since 2010 at 1,290 Bcf on March 31 assuming net storage draws match the five-year average for the balance of the season, but a subdued rate of weekly inventory draws should allow for more natural gas to remain in underground storage than previously expected.

Higher low temperatures associated with lingering below-average temperature readings in forecasts spell ongoing demand weakness that should keep a lid on the pace of storage erosion in the weeks ahead.

In the updated National Weather Service outlook for the six- to 10-day period, below-average temperatures span a large section of the West, a majority of the Midwest, the lower tier of the mid-Atlantic, portions of the Gulf Coast and nearly the entire Southeast as average to above-average temperatures settle over much of the northeastern quadrant of the U.S. and portions of the Southwest into the Gulf Coast.

In the eight- to 14-day projection, below-average temperatures exit parts of the central U.S. to be contained to a few areas of the Midwest and Gulf Coast but linger over most of the Southeast and expand in scope across the West and the mid-Atlantic. Average to above-average temperatures encompass the Northeast, much of the Midwest, most of the Gulf Coast, southern Florida and the remainder of the Southwest.

Price action for natural gas moved Wednesday for Thursday flow was generally biased higher amid mostly supportive demand forecasts.

Among the key hubs, Transco Zone 6 NY next-day gas prices led the uptrend with a near 21-cent increase on average to an index at $2.752/MMBtu. Benchmark Henry Hub spot gas price activity followed with an approximately 7-cent gain in trades averaging at $2.660/MMBtu, then PG&E Gate cash gas pricing that added almost 5 cents to average at $2.764/MMBtu and Chicago hub action that advanced by about 4 cents to an index at $2.400/MMBtu.

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On a regional basis, Northeast day-ahead gas price action was roughly 3 cents higher on the day in deals averaging at $2.395/MMBtu, while Gulf Coast next-day gas pricing was almost 4 cents stronger at an index at $2.514/MMBtu. West Coast spot gas prices were bolstered by about 2 cents on average to an index at $2.200/MMBtu, while Midwest cash gas pricing tacked on 5 cents on the session to average at $2.312/MMBtu.

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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.