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February gas retains upside bias amid technical buying

Following a 3.9-cent advance in the week's opening session to settle at $3.243/MMBtu, February natural gas futures notched additional gains overnight ahead of the Tuesday, Jan. 24, open, amid technical buying with limited fundamental support. The contract held in positive territory through the overnight session, trading between $3.267/MMBtu and $3.327/MMBtu, while trading last 6.4 cents higher at $3.307/MMBtu.

Weather forecasts look to bolster natural gas demand for heating in the near term but could sap space-heating requirements further out, as forecasts show seasonable weather receding from major heat-consuming regions to give way to milder conditions.

The National Weather Service sees average to below-average temperatures engulfing a majority of the country in the six- to 10-day period, leaving only the fringes of the Northeast, most of the Midwest and much of California in the scope of above-average temperatures.

The eight- to 14-day outlook, however, shows above-average temperatures overtaking the bulk of the country's eastern two-thirds and a portion of the Southwest. Below-average temperatures are reflected for large section of the West and the fringes of the Midwest, while average temperatures are called for the Northeast, Florida, a small area of the Midwest and parts of the Southwest.

The expanding scope of milder weather in outlooks suggests declining natural gas demand for heating, which should allow for a renewed slowdown in the pace of inventory erosion in the weeks ahead.

Market participants expect that the most significant weekly storage draws have already been booked, and look for the forthcoming pulls from stocks to keep the total working gas supply near the five-year average levels.

Total working gas stocks now sit at 2,917 Bcf, or 431 Bcf below the year-ago level and 77 Bcf below the five-year average of 2,994 Bcf, after the U.S. Energy Information Administration reported a 243-Bcf withdrawal for the week to Jan. 13 that was the largest draw of the season to date.

The EIA's latest "Natural Gas Weekly Update" covering the week ended Jan. 18, much of which will be reflected in the upcoming storage report due out at 10:30 a.m. ET on Thursday, Jan. 26, supports a possible reduction in the rate of weekly draws, as it shows total U.S. gas consumption tumbling 22% week on week amid diminished demand across all major consuming sectors.

Natural gas inventories are expected to remain at a healthy level leading into the next injection period.

In cash action, the price of natural gas for day-ahead flow opened the workweek on a mixed tenor, as traders considered weather-related demand prospects.

Looking at the major delivery locations, a better-than-6-cent reduction took benchmark Henry Hub next-day gas price activity to an index at $3.162/MMBtu, as a near 5-cent decline steered Chicago spot gas pricing to an average at $3.140/MMBtu. An almost 2-cent slump nudged PG&E Gate hub action to an index at $3.542/MMBtu, as a 6-cent increase against the wider retreat drove Transco Zone 6 NY cash gas pricing to an average at $3.060/MMBtu.

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In regional terms, Gulf Coast and Midwest spot gas prices deflated by about 6 cents on average to indexes at $3.035/MMBtu and $3.021/MMBtu, respectively. Conversely, West Coast day-ahead gas pricing notched a near 5-cent gain in deals averaging at $3.031/MMBtu, as Northeast next-day gas price action tacked on 8 cents on the session to average at $3.223/MMBtu.

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Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.