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April natural gas slumps in technical selling ahead of 1st day in lead

Taking the lead from the March gas contract that rolled off the board in the prior session with a 1.4-cent gain at a finish at $2.639/MMBtu, NYMEX April natural gas futures were on the defensive overnight ahead of Tuesday, Feb. 27, open, as technical selling conspired with overridingly bearish fundamentals. At 6:55 a.m. ET (1155 GMT) the contract was down 2.1 cents at $2.665/MMBtu.

April gas pulls into the lead slot amid sentiment of overbought condition, which is inspiring a round of selling. Adding to pressure on the market, moderate weather associated with the calendar looks to keep demand subdued and allow for more natural gas to remain in underground storage facilities approaching the traditional end of the withdrawal season on March 31.

Revised National Weather Service outlooks show below-average temperatures holding over the West, a few parts of the Midwest and the South Atlantic in the six- to 10-day period, then receding from portions of the Southwest but overtaking a majority of the country's eastern two-thirds in the eight- to 14-day period. Average to above-average temperatures initially dominant across the central and eastern U.S. will eventually shrink in scope to be contained to the northeastern quadrant of the U.S. and parts of the Southwest into the fringes of Texas.

Although returning below-average temperatures across the central and eastern U.S. in forecasts could still inspire some late-season heating demand, higher low temperatures implied by the calendar approaching the transition from winter to the spring shoulder season look to keep a lid on weather-driven demand support.

Lackluster weather-related demand is already seen to have slowed the pace of inventory erosion from the 194-Bcf draw in the week ended Feb. 9 to the 124-Bcf pull in the most recent inventory report week ended Feb. 16.

While the latest drawdown bested the 92-Bcf year-ago pull, it trailed the closely watched 145-Bcf five-year-average draw. It left total working gas stocks at 1,760 Bcf, or 609 Bcf below the prior-year level and 412 Bcf below the five-year average of 2,172 Bcf.

Warmer weather that helped trim natural gas consumption in the subsequent days is expected to have encouraged an additional modest storage draw in the 70s Bcf in the next inventory data that will cover the week ended Feb. 23, which would still be below the 118-Bcf five-year-average withdrawal.

Longer-range projections for the next three inventory report weeks call for withdrawals in the lower 80s Bcf, versus five-year average pulls of 129 Bcf for the week to March 2, 97 Bcf for the week to March 9 and 53 Bcf in the week to March 16.

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

Day-ahead natural gas prices opened the fresh workweek Monday on a mixed tenor on the back of diverging demand in store.

Regionally, Northeast cash gas pricing logged a near 14-cent increase in transactions averaging at $2.449/MMBtu, as Gulf Coast next-day gas prices climbed by around 6 cents on average to an index at $2.493/MMBtu. By contrast, West Coast day-ahead gas price action faltered by roughly 6 cents to an index at $2.269/MMBtu while Midwest spot gas price activity unraveled about 2 cents on the day to average at $2.335/MMBtu.

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Among the key hubs, however, the upside prevailed. Transco Zone 6 NY next-day gas price action rose by 15 cents to an index at $2.650/MMBtu, as benchmark Henry Hub and Chicago day-ahead gas prices advanced by about 2 cents on average to indexes at $2.601/MMBtu and $2.420/MMBtu, respectively. PG&E Gate hub pricing added almost 8 cents on the session to average at $2.818/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.