After ending the prior session up 6.6 cents at $3.368/MMBtu, February gas futures recoiled overnight ahead of the Friday, Jan. 20, open, as traders begin shrugging off the latest bullish inventory data in favor of lackluster midrange fundamentals. The contract tumbled to a $3.272/MMBtu overnight low and was last seen 9.3 cents lower on the session at $3.275/MMBtu.
The Jan. 19 storage report from the U.S. Energy Information Administration outlined a net 243-Bcf draw from stocks for the week to Jan. 13 that left total working gas in storage at 2,917 Bcf, or 431 Bcf below the year-ago level and 77 Bcf below the five-year average of 2,994 Bcf.
The reported drawdown bested the average anticipated 236-Bcf withdrawal coming into the day and exceeded both the 175-Bcf pull in the same week in 2016 and the 170-Bcf five-year average draw. It marked the largest withdrawal of the season to date, surpassing the 237-Bcf pull in the week ended Dec. 23, 2016.
Despite the impressive storage pull, the market proved unable to sustain the upside momentum.
"While this report was more supportive than anticipated and does go some way toward showing a somewhat tighter supply/demand balance, smaller and somewhat bearish storage withdrawals are still likely over the next two reports, limiting the upward price potential," Citi Futures analyst Tim Evans said.
The EIA's latest "Natural Gas Weekly Update" for the week ended Jan. 18, of which the bulk will be covered by the next weekly storage report, shows that total U.S gas consumption tumbled 22% week over week amid diminished demand across all consuming sectors, which feeds the potential for a pullback in the rate of storage erosion in the subsequent inventory data.
Further out, lingering mild weather across major heat-consuming regions looks to keep a lid on demand and limit the amount of natural gas drawn from underground storage facilities.
Updated National Weather Service forecast maps show above-average temperatures gripping nearly the entire eastern third of the country into a majority of the Midwest in the upcoming six- to 10-day period before shrinking in scope but holding over most of the Northeast and the upper tier of the Midwest further out to the eight- to 14-day period.
Average to below-average temperatures encompass a large section of the central U.S. and the entire West in the near term but expand to envelop the bulk of the country in the longer-range period.
Although seasonable cold expands in scope in forecasts, stubborn mild conditions over the major heating regions of the Northeast and Midwest look to limit any uptick in heating demand in the coming weeks.
In cash action, the price of natural gas for day-ahead flow was weaker in much of the country Thursday, as traders considered predominantly softer demand expectations amid milder weather.
Looking at the key hubs, an almost 8-cent decline drove Chicago spot gas pricing to an index at $3.145/MMBtu, as a near 7-cent downdraft took PG&E Gate next-day gas price activity to an average at $3.548/MMBtu. A 6-cent reduction steered Transco Zone 6 NY hub action to an index at $3.130/MMBtu, as a 1-cent slump nudged benchmark Henry Hub cash gas pricing to an average at $3.246/MMBtu.
Regionally, Midwest and West Coast day-ahead gas prices fell by about 7 cents on average to indexes at $3.080/MMBtu and $2.998/MMBtu, respectively. Northeast cash gas price action notched a near 4-cent decrease in trades averaging at $3.244/MMBtu, as Gulf Coast spot gas pricing unraveled about 5 cents on the session to average at $3.099/MMBtu.
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