A further increase overnight in weather-driven demand expectations supported natural gas futures prices early Friday as the market continued to mull balances following the latest government storage data. The expiring May Nymex futures contract was up 0.8 cents to $2.522/MMBtu as of 8:30 a.m. ET. June was up 0.5 cents to $2.553.

Bespoke Weather Services pointed to “another small upward revision” to weather-driven demand expectations from the overnight forecasts heading into Friday’s trading. Specifically, the forecaster said models showed additional heating demand in the northern United States over the next week.

“We even see a late season snowstorm this weekend for the Upper Midwest,” Bespoke said. “Next week also has some noteworthy heat in parts of the South, with numerous highs set to reach the 88-92 degrees level in the Southeast. Highs reaching that level would be close to records for this time of the year in many locations.”

The expiration of the May contract Friday could contribute to “choppy” trading to end the week, the firm said.

“Given the weather demand coming, we feel burns are likely to tighten more into next week, and we see this as a possibly catalyst to allow June prices to ultimately test the $2.60 level next week,” Bespoke said.

Meanwhile, the Energy Information Administration (EIA) reported an on-target 92 Bcf injection into Lower 48 gas stocks for the week ending April 19, lifting inventories to a 55 Bcf surplus over year-ago levels. Total working gas in storage as of April 19 was 1,339 Bcf, 55 Bcf above last year but 369 Bcf below the five-year average.

Genscape Inc. analysts said the 92 Bcf build implied balances were 4.4 Bcf/d loose versus the five-year average when compared to degree days and normal seasonality.

Analysts with Tudor, Pickering, Holt & Co. (TPH) estimated that weather-adjusted, the market continues to be about 5 Bcf/d oversupplied.

That said, “approximately half of this is attributable to maintenance” on liquefied natural gas (LNG) projects and pipelines exporting to Mexico, according to the TPH analysts. “Mild weather across much of the Lower 48” including heating degree days 5% below the five-year average “also contributed to the hefty build, and next week’s print looks to be shaping up much the same.

“Flow data for the current week (next week’s report) shows demand down 5 Bcf/d week/week, driven primarily by a 3.8 Bcf/d drop in residential/commercial demand. Supply is down about 1 Bcf/d week/week, partially offsetting the demand drop, but the net 4 Bcf/d loosening implies a build of around 120 Bcf versus norms of 73 Bcf, which would further erode the deficit” to the five-year average to 18%.

A team of Raymond James & Associates analysts led by J. Marshall Adkins said the 92 Bcf injection implies the market was 0.1 Bcf/d looser versus the same week last year, not counting weather-driven demand. Over the past four weeks the market has averaged about 4.6 Bcf/d looser, according to the firm.

The Raymond James analysts see $2.50 balancing the natural gas market over the long term, with increased supply driven by associated gas growth more than offsetting “robust demand growth.”

“Fundamentally speaking, our natural gas outlook is modestly supported by our expectations for strong natural gas demand and export trends,” the analysts said. “Although project delays are affecting some near-term gas demand from LNG and Mexican exports, the fact remains that U.S. gas demand growth is very stout” from a combination of coal-to-gas switching, petrochemical expansions, LNG exports and exports to Mexico.

Still, “given the high degree of associated gas production generated by some of the largest shale oil plays, U.S. natural gas prices now relate inversely to oil prices, thereby driving gas lower,” according to the Raymond James team. “In the near term, a gas price decline is necessary to stimulate sufficient coal-to-gas switching activity to rebalance the market.”

June crude oil futures were off $1.30 to $63.91/bbl shortly after 8:30 a.m. ET, while May RBOB gasoline was down about 3.8 cents to $2.0937/gal.