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April natural gas posts gains in pre-expiration short covering

NYMEX April natural gas futures were higher Tuesday, March 28, in short covering ahead of options expiration at the close of business and the contract's roll off the board at Wednesday's settle. Outlooks for a storage withdrawal for the week to March 24 that exceeds historical averages provided a modest boost, but fundamental support continued to weaken.

Moved in a $3.011/MMBtu to $3.104/MMBtu spread, the contract settled 4.4 cents higher on the day at $3.096/MMBtu.

April natural gas futures were dragged higher by buying in May futures, with the soon-to-be-lead contract traded from $3.091/MMBtu to $3.188/MMBtu and settling 4.6 cents higher on the session at $3.177/MMBtu.

From a fundamental perspective, some modest support is being garnered from expectations that the U.S. Energy Information Administration storage report for the week to March 24 will outline a withdrawal from stocks ranged from the upper 30s Bcf to the low 50s Bcf, which will compare against a 27-Bcf five-year-average withdrawal and the 19-Bcf pull reported for the corresponding week in 2016.

A withdrawal within the range of expectations would widen the year-over-year deficit and trim the year-on-five-year-average storage surplus, but still leave the total working gas supply at a healthy level.

Further, the pull is expected to be the last of the withdrawal season as analysts and traders looking ahead see moderating weather easing heating demand, allowing a switch over from storage withdrawals to modest injections.

The latest revisions to weather maps from the National Weather Service show above-average temperatures overtaking all but small portions of the Northeast and Northwest in both the six- to 10-day and eight- to 14-day periods.

SNL Image

SNL Image

The warming should result in a shallow demand period as temperatures should be warm enough to erase heating demand but mild enough to limit an uptick in cooling demand.

Natural gas inventories should rebuild through the shoulder period, after ending the withdrawal season at what is expected to be a level atop 2.0 Tcf.

Currently, the total working gas supply sits at 2,092 Bcf, or 399 Bcf below the year-ago level and 266 Bcf above the five-year average storage level of 1,826 Bcf, after a 150-Bcf withdrawal in the week to March 17.

A forecast for cold in the Northeast, but mild weather elsewhere, drove a day of mixed action at the day-ahead markets.

Driven by demand outlooks, deals at Transco Zone 6 NY were about 10 cents higher to an index near $2.80 and Tetco-M3 gained about 5 cents to an index atop $2.70. Conversely, outlooks for lower demand drove a better-than-1-cent loss at the Henry Hub to an index below $2.95, Waha deals fell about 4 cents to an index below $2.70 and Chicago bucked the downside, adding about 1 cent to the prior-day average to an index near $2.95.

In the West, SoCal Border and PG&E Gate each shed more than 5 cents on average to indexes below $2.65 and near $3.15, respectively.

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 and natural gas index prices, as well as forwards and futures, visit our Commodities pages.