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James Hyerczyk
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Natural Gas

Natural gas futures are trading lower late in the session on Friday but profit-taking ahead of the weekend is helping to dampen earlier losses.

The market traded lower shortly after the opening as traders continued to shrug off a modest bullish miss in yesterday’s U.S. Energy Information Administration’s (EIA) weekly storage report to sell off for the 6th session in a row and down 30 cents compared to last Friday.

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Prices continued to sell off further overnight as the GFS weather data lost 15 HDD’s on milder trends next week through March 12th, according to NatGasWeather. The European (EC) model lost a minor 3 HDD’s and was again colder compared to the GFS, especially with a cold shot into the East March 5-7, thereby being nearly 25 HDD’s colder comparatively for the next 15-days. The EC isn’t bullish, just not quite as bearish as the rest of the weather data, the forecaster added.

At 20:00 GMT, April Natural Gas is trading $2.758, down $0.019 or -0.68%.

Short-Term Weather Outlook

According to NatGasWeather for February 26 to March 4, “Cool conditions with morning lows of 10s to 30s will cover the northern and central U.S. for moderate national demand. It will be cool and unsettled over the Northwest with highs of 30s to 50s while warm from South Texas to Florida with upper 60s to lower 80s. High pressure will build across the central, southern, and eastern U.S. this weekend with highs of 50s to 70s for a return to light national demand. However, a cold front will push into the Midwest/Great Lakes/Ohio Valley & Northeast Monday through Tuesday with frosty lows of -0s to 20s for stronger demand.”

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US Energy Information Administration Weekly Storage Report

The U.S. government said on Thursday that the country’s natural gas storage industry posted its second-largest draw on record last week, but the Henry Hub prompt-month contract continued to slip as the severe, country-wide cold retreated.

Storage inventoried decreased by 338 Bcf to 1.943 Tcf for the week-ended February 19, the U.S. Energy Information Administration reported the morning of February 25. The withdrawal was stronger than the 333 Bcf draw expected by an S&P Global Platts survey of analysts. The pull proved more than 200 Bcf stronger than the five-year average.

It was only the second weekly storage withdrawal to measure more than 300 Bcf. The largest weekly storage decline on record stands at 359 Bcf, which was set for the week-ended January 5, 2018.

Ahead of the report, NGI reported a Bloomberg survey of eight analysts produced estimates ranging from a draw as low as 301 Bcf to one as steep as 350 Bcf, with a median pull of 334 Bcf. A Wall Street Journal poll had a tighter range of predictions, with an average draw of 334 Bcf. NGI’s model projected a much smaller draw of 287 Bcf.

Daily Forecast

Prices are being pressured as rising temperatures aided a quick recovery in U.S. production, but short-sellers appear to be unwilling to take any chances ahead of the weekend due to the possibility of a shift back to cold during the March 5 – 7 period.

Looking ahead, the market is likely to enter the summer near 1.5 Tcf, which means the current summer NYMEX Henry Hub strip appears undervalued, according to Platts Analytics. Essentially, we’ll be entering a period of high gas demand with not enough gas available to replenish storage.

For a look at all of today’s economic events, check out our economic calendar.
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