Natural gas futures hit session low after EIA data, cold weather in focus

Natural gas fell to session lows on Thursday after the EIA reported that US inventories fell largely in line with expectations last week, turning average deficits into surpluses. However, forecasts for cold blasts across the eastern, northern and portions of the central US kept losses checked and were likely to offset the report.

Natural gas for delivery in March traded 0.74% lower at $2.810 per million British thermal units at 15:42 GMT, having shifted in a daily range of $2.885-$2.786. The contract rose 2.6% on Wednesday to $2.831.

The Energy Information Administration reported that US natural gas inventories fell by 111 billion cubic feet in the week ended February 13th, compared to analysts projections for a drop in the range of 105-111 bcf and the five-year average decline of 180 bcf. Stockpiles slid by 247 bcf during the comparable period a year earlier.

Total gas held in US storage hubs amounted to 2.157 trillion cubic feet, forming a surplus of 2.8% to the five-year average of 2.099 trillion from last weeks deficit of 0.5%. The surplus over the year-ago inventory level of 1.479 trillion cubic feet expanded to 45.8% from 31.4% a week earlier.

The surplus, however, is not expected to last long as the current weeks widespread cold blasts across the northern, eastern and parts of the central US are factored in. Next week’s report is expected to show an inventory decline well above the normal, probably over -200 bcf. Moreover, if, as forecast, reinforcing cold blasts follow this weekend and next week, this would line up another significant inventory decline for the following week as average withdrawals fall steeply, bearing the potential to bring inventories back to ~100 bcf deficits through the end of the month.

According to NatGasWeather.com, natural gas demand in the US will be very high compared to normal through February 25th, with a neutral weather trend over the West during the following seven days, while the east remains cool.

The eastern US remains in the grip of a strong polar blast that has pushed into the Southeast as well, bringing widespread lows in the single digits and below zero as south as the Tennessee Valley. A more impressive winter storm will develop over the northern and eastern US on Saturday, bringing heavy snow accumulations over the East Coast. Meanwhile, widespread warmth across the West will help break records as highs range between the upper 60s and lower 80s.

Additional cold weather systems will arrive to the north-eastern US late this weekend, keeping temperatures across the Southeast below the freezing point as well, and will continue to track through during next week, inducing strong national heating demand.

The south-central US will also see some cooling, but will remain mostly near normal as the truly frigid air remains confined to the Northeast and Great Lakes. The West will continue to enjoy near or warmer-than-usual weather through the end of the month.

A notable change in weather patterns may come in early March when cold blasts across the East ease, paving the way for the return of mild weather, while Pacific systems hit the West with cooler conditions.