NYMEX January 2018 natural gas futures failed to hold on to early gains to a $2.961/MMBtu session high, reversing instead to close the Wednesday, Dec. 6, trading session only shallowly positive after sinking to a $2.884/MMBtu low. Trading on either side of unchanged near the close, the contract settled 0.8 cent higher on the day at $2.922/MMBtu.
Participants are setting sights on the 10:30 a.m. ET Thursday, Dec. 7, release of natural gas inventories covering the week to Dec. 1, with expectations for the figure spanning from a 3-Bcf injection to a 17-Bcf withdrawal.
Demand during the review week is expected to have been limited by mild weather that generated 8.1% fewer heating degree days than 2016 and 25.6% fewer than normal for the period.
Market consensus calls for a 7-Bcf withdrawal from stocks, which would bring the total working gas supply to 3,686 Bcf. At consensus, and compared with a 43-Bcf pull for the same week in 2016 and the five-year-average withdrawal of 69 Bcf, deficits to the year-ago and five-year-average levels would shrink to 273 Bcf and 45 Bcf, respectively.
In the previous week's data, the EIA reported a net 33-Bcf withdrawal from natural gas inventories during the week ended Nov. 24 that was a downside miss against the market consensus ahead of the report's release that called for a 37-Bcf drawdown from stocks and was below the 43-Bcf withdrawal reported for the same week in 2016 and below the five-year average withdrawal for the week of 47 Bcf.
The lackluster pace of withdrawals over recent weeks is keeping the market well supplied and providing downside pressure on natural gas while weather outlooks offer upside support.
Major heat-consuming regions are bracing for a significant drop in temperatures over the next few days that should propel demand for natural gas as demand for heating rises.
As a storm moves from the central U.S., the first measurable snow is forecast to fall through the weekend in areas of the mid-Atlantic to the Northeast, according to forecasters at Weather.com.
"The 'cold blast' tends to trigger fast, short-lived, short-covering rallies that end with a thud. What a bullish speculator wants to see are the words and phrases like 'lingering cold,' 'hard freeze' or 'cold pressure dome' in the forecast," FX Empire analyst James Hyerczyk said.
That type of lingering cold could be on its way as the National Weather Service outlook for the six- to 10-day and eight- to 14-day periods show below-average temperatures holding over the majority of the eastern third of the U.S.
Lingering cold could generate the kind of steady demand for natural gas the market needs to drive a sustained rally.
Ahead of the cold, the price of natural gas moved in day-ahead markets gained ground.
Transco Zone 6 NY added nearly 30 cents to an index near $3.25, Tetco-M3 gained about 15 cents to an index atop $2.75, Henry Hub traded about 5 cents higher to an index atop $2.90, Waha edged about 1-cent higher to an index near $2.75, and Chicago added nearly 5 cents to an index near $2.90. Milder weather in the West allowed for mixed pricing at key hubs there. SoCal Border deals tumbled about 30 cents to an index near $3.15, while PG&E Gate gained nearly 5 cents to an index near $3.00.
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