March natural gas futures were marginally higher in technical buying amid oversold conditions Tuesday, Feb. 6. The contract settled 1.2 cents higher at $2.759/MMBtu.
Gains came despite fundamental weakness driven by weather outlooks that imply natural gas inventory erosion at a slower pace through the end of the withdrawal season that should equate to a comparatively healthy end-of-season working gas supply.
The latest six- to 10-day weather outlook from the National Oceanic and Atmospheric Administration outlines above-average temperatures spanning the eastern quarter, Gulf and a portion of the Southwest, while average temperatures should dominate across the central U.S. and Northwest. Only a small portion of the Northwest should see below-average temperatures.
The eight- to 14-day outlook shows above-average temperatures spanning nearly the entire U.S. The north-central U.S. and a portion of the Northwest should see average temperatures, while only a small portion of the Northwest is likely to see below-average temperatures.
The weather outlooks support the expectation that natural gas inventory erosion will slow after a 99-Bcf pull was reported for the week ended Jan. 26.
Industry experts looking to the Feb. 8 release of inventory data that will cover the week ended Feb. 2 see natural gas inventory withdrawals spanning the upper 110s Bcf to the low 120s Bcf, which would be below both the 142-Bcf year-ago pull and the 151-Bcf five-year-average drawdown.
Weather in the week ended Jan. 31, much of which will be included in the next storage report, drove a 2% decline in total U.S. gas consumption compared to a week earlier, according to the EIA's latest "Natural Gas Weekly Update." Natural gas consumption in the residential and commercial sectors held unchanged at an average 37.8 Bcf/d, while power-sector consumption tumbled 8% week on week and industrial-sector consumption decreased 1%.
The anticipation of continued moderating weather and a slower rate of storage erosion heading toward spring is capping upside support for values.
Following the release of a 288-Bcf storage pull for the week to Jan. 19 that tied the second-highest net withdrawal ever reported, the EIA said that if withdrawals from storage match the five-year average for the remainder of the heating season to March 31, working gas stocks will total 1,216 Bcf, or 29% lower than the five-year average. Withdrawals that are below the five-year average suggest, therefore, that inventories will end the withdrawal season at a healthier level.
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