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March natural gas extends retreat as wilder weather heads east

After fighting off buyers and settling the Feb. 15 trading session a scant 0.7 cent down at $2.580/MMBtu, March natural gas futures extended the retreat overnight ahead of the Friday, Feb. 16, trade, amid a lack of fundamental support. At 7:35 a.m. ET (1235 GMT), the March contract was trading 3.0 cents lower at $2.550/MMBtu.

The market attempted gains following the Feb. 15 storage report from the U.S. Energy Information Administration for the week to Feb. 9 that outlined a 194-Bcf withdrawal from stocks that was above market expectations calling for a 180-Bcf pull as well as the year-ago drawdown of 120 Bcf and the five-year-average pull of 154 Bcf.

Inventories now sit at 1,884 Bcf, or 577 Bcf below the year-ago level and 433 Bcf below the five-year average storage level of 2,317 Bcf.

While cold weather during the review week supported the larger storage withdrawal, milder weather ahead is calming market concerns for end of season supply, even as storage levels are on pace to end March at their lowest level since 2014, according to Barclays analysts.

The pace of storage erosion is expected to slow with milder weather sapping heating demand.

Total U.S. consumption of natural gas fell by 7% in the week to Jan. 14, much of which will be included in the next storage report due out from the EIA and covering the week to Feb. 16.

Data showed natural gas consumed for power generation climbed by 2% week over week. Industrial-sector consumption decreased by 2% week over week. In the residential and commercial sectors, consumption declined by 14%. Natural gas exports to Mexico decreased 1%, the EIA said in its latest Natural Gas Weekly Update.

Weather outlooks support additional demand reduction and a further slowdown in the pace of storage erosion in the weeks leading up to the end of titular withdrawal season, considered March 31.

The six- to 10-day weather forecast from the National Weather Service shows above-average temperatures across nearly the entire eastern half of the country with a band of normal temperatures in the central and Southwest separating the above-average temperatures from the below-average readings that dominate in the western half of the country.

For the eight- to 14-day period, above-average temperatures expand to include the East and a larger portion of the central U.S., shifting the band of normal temperatures toward the west central U.S. and shrinking the area of below-average temperatures in the West.

Longer-range weather outlooks add to the bearish market sentiment.

The National Oceanic and Atmospheric Administration's latest temperature outlook issued Feb. 15 indicates that there is a 40% or better chance that above-normal temperatures will prevail across most of the Northeast, the Southeast, Texas and parts of the West Coast from March through May.

Southern Texas and much of the Southwest have the highest chance of seeing above-average temperatures through the period. The Midwest, regions of the Northwest and the north-central U.S. have the greatest chance of experiencing average to below-normal temperatures from February to April.

At cash gas markets, prices predominantly swung higher for deals done for Friday delivery.

At the hubs, only Henry Hub trades managed gains, adding 4.3 cents to an index at $2.490/MMBtu. Transco Zone 6 NY, Chicago and PG&E Gate saw gains of 13.4 cents, 0.5 cent, and 3.5 cents, respectively. Averages were pegged at $2.531/MMBtu, $2.442/MMBtu and $2.824/MMBtu, respectively.

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All markets were higher on a regional basis. The Northeast led with a gain of 13.1 cents to $2.499/MMBtu. A gain of 4.9 cents brought the Midcontinent index to $2.353/MMBtu, the Gulf added 2.7 cents to an index at $2.451/MMBtu and the West gained 2.0 cents to an average at $2.285/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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.