Natural gas futures advance amid expectations for bullish supply data

Natural gas futures rose on Thursday, ahead of a government report due later today that may show stockpiles declined at a faster than the five-year average pace, while supplies are already at the weakest level for this time of the season since 2003.

On the New York Mercantile Exchange, natural gas for delivery in May traded at $4.398 per million British thermal units at 12:23 GMT, up 0.78% on the day. Prices held in a daily range between $4.404, and $4.312 per mBtu. Yesterday, the energy source added 3%, rebounding from more than two-month lows amid speculation for a much-larger-than the five-year average inventory drop. Natural gas futures are up 3% this year, as supplies reached the weakest level since 2003.

US gas inventories levels

A government report later today may show a US inventory decline of 74 billion cubic feet in the week ended March 28, according to the median of 11 analyst estimates in a Bloomberg News survey. This compares to a much smaller five-year average drop, which is 8 bcf. The EIA is scheduled to release its weekly US gas storage report at 14:30 GMT.

The Energy Information Administration reported last Thursday that US natural gas inventories fell by 57 billion cubic feet in the seven days through March 21st, more than analysts’ median forecast of a 52 billion cubic feet drop and compared to a withdrawal of 90 billion cubic feet the same week a year ago. However, the decline was more than 8 times larger than the five-year average drop of 7 bcf during the comparable period.

Total gas held in US underground storage hubs fell to a 11-year seasonal low of 896 billion cubic feet. US gas stockpiles were 50.1% below last year’s amount of 1.795 trillion cubic feet during the comparable week. The deficit to the five-year average widened to a record 50.8%, up from 47.9% a week earlier.

US weather outlook

Another fairly strong spring storm will be tracking slowly across the central US with increasing showers and thunderstorms in the warm sector and some heavy snowfall into portions of the Midwest and Great Lakes, NatGasWeather.com reported on April 3.

After the storm retreats on Friday, cool conditions will set up through the weekend, before another surge of milder conditions returns back early next week.
There is an increasing probability that another fairly strong spring storm develops by the middle of next week, with the potential to bring some very chilly Canadian air and push as deep as the southern US.

However, the website reported that after April 11th much milder temperatures will push into many US regions, significantly easing natural gas and heating demand.