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NYMEX March gas holds steady, settles at $2.587/MMBtu

The NYMEX March natural gas futures contract was relatively unchangedWednesday, settling 0.7 cent lower at $2.587/MMBtu, as the market took a breakfrom what has been a volatile month so far.

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Despite record US demand and gas storage numbers that are well below the five-year average during February, the NYMEX front-month contract hasexperienced sharp declines since March took over as the front-month contract,as forecasts of warmer-than-average weather and strong production have drivenprices down.

Wednesday's small price movement takes a step back from drops experiencedlately in the front-month contract, as the contract has fallen $1.04, or28.6%, over the prior 12 trading days.

JJ Woods Associates President John Woods said the market dip throughoutFebruary "has been an overreaction to the downside" as concerns of strongoutput and warmer weather pressured the front-month contract from the$3.60/MMBtu level seen just a few weeks ago.

"Just like prices were too overdone" at $3.60/MMBtu, the market is likelyto correct the overreaction as "prices will reach $3[/MMBtu] shortly" awaiting"some news," Woods added.

But that news did not arrive Wednesday, as US demand is projected toslide in the coming weeks, averaging 81.8 Bcf/d over the next seven days, down9.6 Bcf/d from the 91.4 Bcf/d average over the previous seven days, accordingto S&P Global Platts Analytics.

The projected demand drop could be partly attributed to the most recentsix- to 10-day weather outlook from the National Weather Service, which callsfor a high probability of warmer-than-average weather along the East Coast,Southeast and demand centers in the Midwest.

Although the forecast for warmer weather will likely lead tobelow-average storage withdrawals in the coming weeks, the draw for last weekis projected to be well above average because of the cooler weather seen thatweek. A consensus of analysts S&P Global Platts surveyed expects a 183-Bcfwithdrawal for the week that ended February 9, above the 154-Bcf pull averagedover the past five years, according to US Energy Information Administrationdata.

The NYMEX settlement is considered preliminary and subject to changeuntil a final settlement price is posted at 7 pm EST (2400 GMT).

--Tyler Schwartz, tyler.schwartz@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com