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May natural gas ticks higher overnight on weather supports

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May natural gas ticks higher overnight on weather supports

Aftertripping 3.7 cents lower to a settle at $1.959/MMBtu in the previous session,May natural gas futures drifted both higher and lower overnight ahead of theFriday, April 1, trading session. Additions to the loss column brought thefront-month contract to $1.950/MMBtu, but the contract reversed course to tradelast up 3.0 cents at $1.989/MMBtu.

Themarket continues to garner support from lingering cold weather in forecaststhrough early April, with the National Oceanic and Atmospheric Administrationcalling for below-average temperatures across the eastern third of the countryin the six- to 10-day period, a swath of average temperatures across a portionof the central U.S. and above-average temperatures spanning from the West intothe central U.S.

Bymid-April, the eight- to 14-day outlook shows moderate warming in the East, butstill the predominance of below-average temperatures, with only portions ofMaine and New Hampshire in the Northeast, and Florida in the Southeast, joiningan area of the central U.S. under average temperatures. The West into thecentral U.S. will continue to experience above-average temperatures.

Lingeringcold in the near term supports some ongoing heating demand that continues toprovide some upside potential for the market. Otherwise, the steady warming tomilder spring conditions should begin to sap heating demand ahead of the onsetof cooling load and pull that support from the market.

Alack of overall demand is expected to combine with an end-of-season natural gasinventory at or near the March 31, 2012, end-of-season record of 2,473 Bcf, asthe latest storagefigure released by the U.S. Energy Information Administrationshowed a total working gas supply of 2,468 Bcf after a 25-Bcf withdrawal forthe week to March 25. At that level, supplies are 1,002 Bcf above the year-agolevel and 843 Bcf above the five-year average storage level of 1,625 Bcf, withonly one week of data remaining for the 2015-16 winter withdrawal season, andexpectations calling for a build to stocks.

Forthe March 31 report, a survey of analysts and traders ahead of the report'srelease showed outlooks ranged from a 16-Bcf withdrawal to a pull of 33 Bcf forthe review week, with a consensus formed at a 24-Bcf drawdown from stocks. Thefigure was neutral to bullish when compared against the five-year averagewithdrawal of 22 Bcf and the year-ago pull of 10 Bcf, providing some upsidesupport for the market.

Tradershowever, continue to return their focus to the total supply picture thatanchors the market to the downside.

Despiteovernight gains, while the current weather outlooks prevent a steeper declinein values, the erosion of demand will lead to a long period of injectionsthrough the spring shoulder season that will keep the bulls from gaining anytraction. The market is counting on strong demand from the power-generatingsector through the summer cooling season, to wear down the supply before thefall shoulder period renews injections.

Inspot gas trading the markets were biased to the upside Thursday, as a returnengagement of cold weather supported an advance.

Atthe hubs, a gain of 3 cents at Transco Zone 6 NY brought the index to $1.29/MMBtu,the Henry Hub added 10.9 cents to an index at $1.983/MMBtu, and PG&E Gatetraded up 0.9 cent to an index at $1.959/MMBtu. Conversely, inching 0.1 centdown, Chicago found an index at $1.982/MMBtu.

On aregional basis, in the Northeast, a gain of 6.4 cents brought the index to$1.531/MMBtu, the Gulf Coast was up 5.3 cents to $1.858/MMBtu, the Midcontinentadded 5 cents to $1.848/MMBtu and the West drifted 1.1 cents lower to$1.650/MMBtu.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.