Natural gas futures decline amid milder US weather forecast

Natural gas futures declined on Tuesday, as weather forecasting models called for above-normal temperatures across many densely populated US areas, curtailing demand for the power-station fuel.

On the New York Mercantile Exchange (NYMEX), natural gas for delivery in April fell by 0.42% to trade at $4.632 per million British thermal units by 12:47 GMT. Natural gas futures hit a session high at $4.682 per mBtu, while day’s low was touched at $4.625 per mBtu. Yesterday, prices touched $4.732 per mBtu, the strongest since March 3rd.

Natural gas added 0.15% last week, after losing 26% in the previous 5-day period, the biggest weekly drop since December 1996. In 2013, the energy source added 26%, the best performance since 2005 and second straight annual advance.

Short-term weather outlook

NatGasWeather.com reported on March 11th that temperatures today will warm to above normal across many US regions, significantly easing natural gas and heating demand. However, the warm-up will be brief, especially over the Midwest and eastern US as a strong winter storm and following cold blast will track through over the coming days.

Heavy snowfall is expected across the Ohio Valley and into the Northeast, with wide areas receiving more than 6-10 inches of snow. The associated cold air mass will probably push fairly deep into the Southeast, leaving frigid temperatures over many areas. The very cold air will reach as far as Southern US, but will be confined to the Great Lakes region and Northeast with lows dropping into the single digits and teens.

Extended forecast

NatGasWeather.com’s extended forecast for the period March 17th-23rd called for quite cold weather pattern to develop late next week, especially over the Great Lakes and Northeast and to last for the first 5 days of the outlook period as reinforcing shots of cold air continue. However, at the end of the period warmer conditions are expected over the northern US.

A fresh cold blast is expected to push deep into the Southeast early next week. Few days later, a reinforcing cold outbreak will follow, keeping temperatures over the northern US much-below-normal. A strong cold blast will sweep through the central and eastern US between March 18-21st, bringing freezing temperatures across many regions. The weather pattern will be a cold one, especially for the northern US and there are no signs of it ending at least until the beginning of April.

US gas inventories levels

The Energy Information Administration reported on Thursday that US natural gas inventories fell by 152 billion cubic feet in the seven days through February 28th, above the median analyst’ forecast of 138 billion cubic feet drop and compared to a withdrawal of 149 billion cubic feet a year ago. The decline was also well above the five-year average drop of 105 billion.

Total gas held in US underground storage hubs fell to a 10-year seasonal low of 1.296 trillion cubic feet. US gas stockpiles were 43.2% below last year’s amount of 2.104 trillion cubic feet during the comparable week. The deficit to the five-year average widened to a record 38.8%, up from 34.5% a week earlier.

Inventories at the East Region received a net withdrawal of 82 bcf and fell to 525 bcf, 41.3% below the five-year average of 895 billion cubic feet. Stockpiles in the West Region fell by 27 bcf to 190 bcf and were 37.5% beneath the average. Inventories at the Producing Region slid by 43 bcf. At 481 bcf, they were 36.2% below the five-year average amount of 754 billion cubic feet.