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February natural gas futures price in weather, extend losses

February natural gas futures added to losses at midweek Wednesday, Jan. 18, as weather forecasts were little changed and priced into the market. The contract attempted gains, reaching an intraday high at $3.437/MMBtu, but returned to the negative side of the ledger, finding a $3.282/MMBtu low and a settle 11.0 cents lower on the day at $3.302/MMBtu.

Weather forecasts continue to call for an erosion of above-average temperatures across a large portion of the U.S. between the six- to 10-day and eight- to 14-day periods, but the above-average readings will continue in the Northeast and the Midwest through the longer range, providing limited support for demand hikes based solely on the weather.

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SNL Image

Looking to storage, the market is expecting a ramp up in the pace of storage erosion, after a modest 49-Bcf withdrawal reported for the week to Dec. 30, 2016, and a subsequent drawdown of 151 Bcf for the week to Jan. 6.

The total working gas supply currently sits at 3,160 Bcf, or 363 Bcf below the year-ago level and 4 Bcf below the five-year average storage level of 3,164 Bcf.

Analysts and traders looking ahead to the next storage report from the EIA due out at 10:30 a.m. ET on Thursday, Jan. 19, expect withdrawals ranged from 216 Bcf to 251 Bcf, with consensus formed at a 236-Bcf drawdown from stocks.

The larger storage pull is forecast despite degree day data from the National Oceanic and Atmospheric Administration, showing 6.0% fewer heating degree days compared to last year for the review week to Jan. 14, and 10.6% fewer than normal.

A withdrawal at consensus would pull the total working gas supply to 2,994 Bcf, and with comparisons to a 170-Bcf five-year average pull and the 175-Bcf drawdown reported for the same week in 2016, the storage deficits will widen to 354 Bcf year on year, and 70 Bcf compared with the five-year average.

Despite the widening deficits, natural gas supplies are expected to end the withdrawal period at a still-healthy level. The EIA forecasts end-of-March supply at 1,745 Bcf, while ION Energy analyst Kyle Cooper sees early-April inventories at 1,572 Bcf.

In day-ahead trade, most markets continued to retreat as milder weather softens demand outlooks.

Transco Zone 6 NY traded about 10 cents lower to an index near $3.15, Tetco-M3 slipped nearly 5 cents to an index near $3.10, Henry Hub deals were about 5 cents lower to an index around $3.25, Waha shed about 5 cents to an index near $3.10 and Chicago slipped nearly 5 cents to an index around $3.20. At the SoCal Border, a near 10-cent loss brought the index closer to $3.25, while PG&E Gate traded about 5 cents lower to an index near $3.60.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.