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March gas sinks ahead of week's closing session

After ending the prior session up 1.9 cents at $3.187/MMBtu, March gas futures tumbled overnight ahead of the Friday, Feb. 3, open, as traders look to weather forecasts that should drive limited demand and an ample supply. Attempting to add to the upside, the contract found an overnight high at $3.201/MMBtu, before reversing gains and breaking past key support levels to a $3.065/MMBtu overnight low. The contract was last seen 9.7 cents lower on the session at $3.090/MMBtu.

In its latest outlooks, the National Weather Service sees average to below-average temperatures holding over the Northeast, Mid-Atlantic and a majority of the Midwest in the upcoming six- to 10-day period, before shrinking in scope but lingering over the Northeast and much of the Mid-Atlantic further out to the eight- to 14-day period. Above-average temperatures blanket the balance of the U.S.

Milder weather in store for most of the country should sap natural gas demand for heating and reduce the amount of natural gas drawn from underground storage facilities, but lingering cold over the major heating regions of the Northeast and Midwest could support heating load in the coming weeks and drive inventory draws back higher after the modest pulls reported over the last two weeks.

Total working gas stocks currently sit at 2,711 Bcf, or 266 Bcf below the year-ago level and 59 Bcf above the five-year average of 2,652 Bcf, after the U.S. Energy Information Administration outlined a net 87-Bcf drawdown from inventories in its latest storage data for the week to Jan. 27.

The reported storage withdrawal was at par with consensus estimates, but below both the 166-Bcf five-year average draw and a 169-Bcf pull seen in the corresponding week in 2016.

Warmer weather that limited heating demand is seen to have allowed for the modest drawdown from stocks. Temperatures across the contiguous U.S. during the storage report period averaged at 44 degrees Fahrenheit, or 11 degrees higher than normal and 10 degrees higher than last year at this time. Heating degree days totaled 151, versus 219 in the year-ago period and a normal of 223, EIA data showed.

The current storage picture continues to suggest ample inventories leading into the next shoulder period, but returning cold weather could support larger storage withdrawals that would threaten end-of-season supply.

Already, a reprise of cold weather in the transition from January to February has ramped up natural gas demand, which could translate to a renewed uptick in the rate of storage erosion. The EIA's latest "Natural Gas Weekly Update" for the week to Feb. 1, much of which will be reflected in the next storage data, show that total U.S. gas consumption rose 13% week on week, as colder weather bolstered heating demand.

The EIA sees inventories ending March at 1,745 Bcf, or 3.3% below the five-year average for that time of year.

In cash activity, the price of natural gas for day-ahead flow predominantly retreated Thursday, as market participants considered diminishing business-related demand leading up to the weekend break.

Looking at the key delivery locations, a near 6-cent decline drove PG&E Gate spot gas price action to an index at $3.430/MMBtu, as an almost 3-cent reduction took benchmark Henry Hub next-day gas pricing to an average at $3.125/MMBtu and a better-than-2-cent slump nudged Chicago day-ahead gas price activity to an index at $3.062/MMBtu. Conversely, a near 23-cent gain steered Transco Zone 6 NY hub pricing to an average at $3.646/MMBtu.

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Regionally, West Coast cash gas price activity notched an almost 7-cent decrease in trades averaging at $2.797/MMBtu, as Gulf Coast day-ahead gas pricing advanced by around 1 cent against the broad downtrend to an index at $3.034/MMBtu. Midwest spot gas prices faltered by roughly 5 cents on average to an index at $2.974/MMBtu, as Northeast next-day gas price action shed about 2 cents to average at $3.527/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.