Natural gas futures reversed lower in early trading Friday as analysts mulled updated inventory data and as overnight weather modeling dialed back the extent of lingering late-winter cold. After brushing up against the $5/MMBtu mark Thursday, the April Nymex contract was down 8.1 cents to $4.909/MMBtu at around 8:40 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

The Energy Information Administration (EIA) on Thursday reported a net 79 Bcf withdrawal from U.S. natural gas stocks during the week ended March 11. That left inventories at 1,440 Bcf for the period, 304 Bcf (17.4%) below the five-year average of 1,744 Bcf.

“The weather-normalized injection signals loosening trends in the gas markets,” Enverus analyst Krishna Sapkota said of the latest EIA print. “…The weather-adjusted injections loosened up week/week, primarily driven by a gain in Appalachian supply.”

Sapkota said a decline in output from Appalachia and strong liquefied natural gas feed gas demand point to “tightening trends in the coming week.”

Based on the EIA report, Tudor, Pickering, Holt & Co. (TPH) analysts estimated a 1.8 Bcf/d undersupply for the market after adjusting for weather.

“This week, the market is tracking fairly loose on a relative basis despite depressed supply levels, with residential/commercial demand tracking about 12 Bcf/d below the five-year average the past few days,” the TPH analysts said.

Warm weather has “also softened power generation demand similarly, as it has tracked largely in line with the five-year in contrast to year-to-date figures, which had tracked around 3 Bcf/d, on average, to the upside,” the analysts added.

Looking at the supply picture, “recent volatility” has seen volumes total in the 92.5-93.5 Bcf/d range, according to TPH, down from around 94-95 Bcf/d. Production has underperformed the firm’s forecasting for output to reach the 96 Bcf/d level.

Meanwhile, the forecast outlook, especially in the American model, trended warmer overnight, easing off on projected late winter chills in the process, according to NatGasWeather.

Both the American and European models “weren’t quite as cold with weather systems into the northern U.S. March 26-28 and were also warmer trending with the U.S. pattern March 29-April 1,” NatGasWeather said. “As such, out of the next 15 days, the only period cold enough to satisfy is March 26-28.”

Friday’s trading could bring “violent price swings” ahead of “another dangerous weekend to hold” amid geopolitical uncertainty and potential for changes in weather and fundamentals, the firm said.