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May natural gas takes lead position on the defensive

May natural gas was on the defensive in its opening day as the lead contract, slipping amid a lack of fundamental support spearheaded by a withdrawal from the natural gas supply that was slightly below expectations. The contract tumbled to its $3.141/MMBtu low following the midmorning release of the storage data and retraced some losses to finish the Thursday, March 30, session down 4.0 cents at $3.191/MMBtu.

The U.S. Energy Information Administration reported a net 43-Bcf withdrawal from natural gas inventories in the Lower 48 during the week ended March 24 that was just below market consensus formed at a 44-Bcf draw from stocks but was above both the 19-Bcf withdrawal reported for the same week in 2016 and the five-year average withdrawal of 27 Bcf.

The draw brought total U.S. working gas supply to 2,049 Bcf, or 423 Bcf below the year-ago level and 250 Bcf above the five-year average storage level of 1,799 Bcf.

The further widening of the year-on-year deficit and a trimming of the year-on-five-year-average storage surplus limited the downside, but expectations that this report will have outlined the final withdrawal of the winter 2016-2017 withdrawal season persuaded the market lower.

Natural gas inventories could begin to refill as early as the next storage report from the EIA that will cover the current week to March 31.

A mix of weather during the review week is expected to have allowed for a modest injection, with early forecasts calling for builds in the low teens.

Weather meanwhile, is expected to become less supportive as the calendar moves deeper into spring.

The latest revisions to weather forecasts from the National Weather Service were little changed on the day. The six- to 10-day period looks to bring above-average temperatures to the majority of the country with small patches in the Northeast, Northwest and the central U.S. expected to see average temperatures. For the eight- to 14-day period, portions of the West will see average and below-average temperatures while the majority of the country will continue to see above-average temperatures.

SNL Image

SNL Image

Warming, particularly across the key heating regions of the Northeast and Midwest, should continue to erode demand for heating allowing for a ramp up in storage injections ahead of any significant cooling demand that could begin to limit weekly builds.

Lingering cold weather in the Northeast allowed for modest bumps higher in the price of natural gas moved for Friday delivery at key hubs in the region. Transco Zone 6 NY and Tetco-M3 each added less than 1 cent to indexes below $2.95 and $2.90, respectively.

Elsewhere, while Henry Hub trades were about 5 cents higher to an index atop $3.05, Waha and Chicago each traded about 5 cents lower to indexes near $2.70 and below $3.00, respectively. Prices were mixed and changes were modest in the West as SoCal border deals moved about 1 cent lower to an index near $2.70, while PG&E Gate added about 1 cent to an index near $3.20.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.