April natural gas futures extended losses in the week's closing session Friday, March 9, as market participants look beyond cold weather. The contract closed the trading session 2.4 cents lower at $2.732/MMBtu.
Although struggling to the downside, the market remains depressed by the expectation that demand will decline as temperatures moderate in the transition from the winter heating season to the spring shoulder period.
Inventory data for the week to March 2 reflected the changing weather pattern as degree day data showed that for the week to March 3, there were 5.3% fewer heating degree days than in 2017 and 18.2% fewer than normal. The lower demand for natural gas resulting from the weather drove a natural gas storage pull of just 57 Bcf.
The 57-Bcf withdrawal was just below the 58-Bcf consensus outlook ahead of the storage report's March 8 release. The figure was on par with the pull reported for the corresponding week in 2017 and was well below the 129-Bcf five-year-average withdrawal. Inventories currently sit at 1,625 Bcf, or 680 Bcf less than 2017 at this time and 300 Bcf below the five-year average of 1,925 Bcf.
Demand was boosted by cold temperatures lingering in key heat-consuming markets in the current week to March 9. Total U.S. consumption of natural gas rose 2% week on week in the week to March 7, much of which will be included in the upcoming storage report. Natural gas consumed for power generation declined 5% week over week, industrial-sector consumption increased 1% and in the residential and commercial sectors, consumption jumped 10% as temperatures generally became colder except on the West Coast, the U.S. Energy Information Administration said.
Consequently, a larger withdrawal in the low 100s Bcf is expected for the week to March 9 and again for the week to March 16 as colder weather maintains its grip at least through mid-March.
The National Weather Service's forecast for the six- to 10-day period shows average and below-average temperatures gripping the eastern third of the country as well as holding over a portion of the north-central and western U.S. Above-average temperatures are expected in majority of the central U.S.
The area of below-average temperatures is called to shrink in the East over the eight- to 14-day period to include only a portion of the Northeast and mid-Atlantic. Average and above-average temperatures are forecast to dominate just beyond the eastern half of the country, while below-average temperatures span the majority of the western half of the country through the period.
Market participants continue to look at weather as a determinant for end-of-season inventories, as it drives natural gas demand usage. The EIA said that if net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season, working gas stocks will total 1,402 Bcf by March 31, considered the traditional end of withdrawal season. At that level, inventories will be 18% lower than the five-year average, the EIA said. Working gas stocks ended the 2013-2014 heating season at 837 Bcf, which is the lowest-reported level for that time.
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