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James Hyerczyk
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Natural Gas

Natural gas futures finished lower last week with the selling pressure driven by a mild weather pattern, a weak response to the second largest storage draw on record and lower spot market prices. The focus now shifts to the start of meteorological spring on March 1 and whether end-of-March storage winds up at or above 1.6 Tcf.

Total inventories will start the new month down to 1.8 Tcf, but warmer temperatures are expected to weigh on demand so storage draws could undoubtedly be weak.

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Mobius Risk Group analysts said, “Regardless of how warm March is, the odds of finishing the withdrawal season anywhere close to 2 Tcf are essentially nonexistent, while the risk of falling sub 1.5 Tcf are at least 60% if not greater.”

This assessment raises concerns of a possible deficit at the start of the summer cooling season.

Last week, April natural gas settled at $2.771, down 0.220 or -7.36%.

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 for the week-ended February 19, 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 (EIA) 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.

The draw brought total inventories down to 1,943 Bcf, 298 Bcf lower than year-ago levels and 161 Bcf below the five-year average of 2,104 Bcf, according to EIA.

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Short-Term Weather Outlook

According to NatGasWeather for March 1 to March 7, “A cold front will extend from Northern Texas to the Northeast Monday with heavy showers and thunderstorms. Behind the cold front over the Great Lakes, Ohio Valley, and Northeast, frosty lows of 0s to 20s will bring stronger demand the next few days, then warming mid-week as high pressure returns with highs of 40s to 60s. The West will be mild to warm with highs of -40s to 70s, then cooling late in the week as weather systems bring showers. After a mild break over the East mid-week, another cold shot with rain and snow will arrive Thursday-Saturday with chilly lows of 0s to 30s for stronger demand.”

Spot Gas Prices Mostly Lower Last Week

Spot gas prices edged lower early in the week, but moved higher on Friday as a cold front was forecast by around Monday to push toward the Midwest, Great Lakes, Ohio Valley and Northeast. The chilly conditions were expected to linger through Tuesday, with temperatures forecast to fall below zero in some areas for a quick bump in demand with the start of the new month.

Since the cold blast was expected to be quick moving, it is not expected to post the price gains the market saw during the prolonged Arctic event seen two weeks ago.

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

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