April natural gas futures moved decidedly higher Tuesday, March 6, as lingering cold weather in forecasts supported short-covering gains. Trading to a $2.754/MMBtu near one-month high, the contract pulled back to settle 4.5 cents higher on the day at $2.749/MMBtu.
The latest updates to weather forecasts from the National Weather Service show below-average and average temperatures dominating in the eastern half of the country and in portions of the west-north-central and West Coast in the six- to 10-day period. Small portions of the Northeast and north central U.S. will see above-average temperatures along with the remaining areas in the western half of the country.
For the eight- to 14-day period average and below-average temperatures span across nearly the entire eastern third and western half of the U.S., while above-average temperatures grip portions of the Northeast, Gulf, Central and Southwest.
Weather could support stronger demand for heating even as the market considers the higher low temperatures associated with the changing in seasons from winter to spring.
Upticks in demand will likely support a boost in the rate of natural gas inventory erosion in coming weeks, although outlooks suggest withdrawals will continue to lag against the five-year averages.
Milder weather in the week to March 2, covered by the next inventory report from the U.S. Energy Information Administration slated for release on Thursday, March 8, is expected to have driven a relatively modest drawdown in the upper 50s Bcf, after the 78-Bcf pull reported for the previous week.
Inventories currently sit at 1,682 Bcf, or 680 Bcf below the year-ago level and 372 Bcf below the five-year average storage level of 2,054 Bcf.
A pull within the range of expectations would come in near the 57-Bcf pull reported for the corresponding week in 2017, but would be well below the 129-Bcf five-year-average withdrawal. Subsequent reports are expected to reflect colder weather, bumping up to a 97-Bcf pull for the week to March 9 and an 87-Bcf withdrawal for the week to March 16, according to early estimates. The drawdowns would be a match and an upside miss against five-year averages for the respective weeks in 2017.
Natural gas inventories are on pace to reach the traditional end of withdrawal season on March 31 at a level below the five-year average. The EIA said storage withdrawals matching the five-year average for the remainder of the season would result in a total working gas supply of 1,330 Bcf, which is 22% below the five-year average, and the second-lowest reported level at the end of heating season since 2010.
Working gas stocks ended the 2013–14 heating season at 837 Bcf, which is the lowest-reported level for that time.
Although closely monitored, the impact on the market of the five-year-average storage level is being muted by the calendar, as lower demand will eventually replace the late-season boost in load as temperatures continue to moderate.
Additionally, rising rig counts feed expectations for strong production.
Baker Hughes Inc. reported oil-directed rigs were up in the week to March 2 to a total of 800, which was up 191 from the same week in 2017. Natural gas-directed rigs were up two on the week to 181 and were up 35 rigs on the year.
Overall U.S. supply of natural gas climbed by 1% in the week ended Feb. 28, from 83.8 Bcf/d to 84.6 Bcf/d. Dry production posted a 1% gain week over week as it grew from 78.0 Bcf/d to 78.5 Bcf/d, while net imports from Canada logged a 4% uptick over the same period as it rose from 5.4 Bcf/d to 5.6 Bcf/d, the EIA said in its latest "Natural Gas Weekly Update" released March 1.
