Natural gas futures surge after EIA inventory report, weather models eyed

Natural gas rose sharply on Thursday following a bullish supply report by the EIA but weather forecasts calling for widespread mild weather across the US after one last cold blast this weekend pushed prices below $2.700 going into the holiday close.

Natural gas for delivery in May settled 4.15% higher on Thursday at $2.713 per million British thermal units, having earlier risen to a one-week high of $2.719.

The Energy Information Administration reported yesterday that US natural gas stockpiles fell by 18 billion cubic feet during the seven days ended March 27th, exceeding analysts consensus estimate of -10 bcf. This compared to the five-year average withdrawal for the week of -22 bcf, while gas in storage declined by 71 bcf a year ago.

Total gas held in US storage hubs amounted to 1.461 trillion cubic feet, narrowing a deficit to the five-year average inventories of 1.651 trillion to 11.5% from 11.6% a week earlier. The surplus over year-ago stockpiles expanded to 75.4% from 63.6% the preceding week.

However, overall bearish weather sentiment kept a lid on gains. According to NatGasWeather.com, natural gas demand in the US will be low-moderate compared to normal through April 8th, with a neutral weather trend for the following seven days.

A fresh cold blast will push into the northern and eastern US today into Saturday, sending overnight lows below the freezing point through April 6-7th and inducing a period of stronger heating demand. Cooler conditions will also establish over the southern Plains and Texas during the weekend, easing the need for cooling as highs drop back into the 60s and 70s. The West will be mainly warm and dry, although the Northwest will be cooler due Pacific weather systems carrying rain and snow.

However, the cold front will retreat as next week progresses, and without follow-through overall bearish weather sentiment will persist as heating demand considerably eases.

“The reservoir of frigid air will become established just across the border into Canada, and while chilly weather systems will continue into the northern US, they arent expected to tap into any truly cold Arctic air,” NatGasWeather.com said.

Typical Spring weather systems with showers and thunderstorms will track through the US during the second week of April, but the central, southern and eastern US will enjoy seasonal or slightly warmer conditions. Pacific weather systems with showers will continue to affect the West, keeping temperatures near normal or slightly lower.

Next week’s inventory report, due on April 9th, will likely bring a small inventory build instead of an average decline due to this weeks seasonal and slightly warmer conditions. The five-year average inventory drop for the seven days ended April 3rd is -2 billion cubic feet, while stockpiles declined by 8 bcf during the comparable period a year earlier.

Readings

According to AccuWeather.com, New York will see temperatures peak at 65 degrees Fahrenheit today, 9 above normal, before establishing in the mid 50s through April 11th. Readings in Chicago will be near the seasonal 55-57 degrees or slightly lower through April 11th, before jumping into the mid 60s afterwards.

Down South, highs in Houston will max out at 84 degrees on April 4th, 8 above the average, and will range between 78 and 87 degrees on April 6-10th. Temperatures in Los Angeles will peak at 87 degrees today, 16 above usual, and 79 degrees tomorrow, before dropping to the upper 60s and lower 70s for the rest of the month.