After advancing by a meager 0.8 cent to a finish at $2.922/MMBtu in the prior session, NYMEX January 2018 natural gas futures lost footing overnight ahead of the Thursday, Dec. 7, open, as bearish storage expectations undermined lingering weather support. At 6:40 a.m. ET, the contract was 9.1 cents lower at $2.831/MMBtu.
Traders and analysts anticipate a pull from stocks well below average when the U.S. Energy Information Administration releases its next weekly inventory data at 10:30 a.m. ET on Thursday, for the week ended Dec. 1. Estimates for the report call for a 7-Bcf withdrawal at consensus, with the full range of projections spanning a 3-Bcf injection to a 17-Bcf drawdown. This would compare to a 69-Bcf five-year average draw and the 43-Bcf pull seen in the corresponding week in 2016.
Mild weather during the storage report week is seen to have sapped demand, as the National Oceanic and Atmospheric Administration's degree day data for the review week to Dec. 2 detail heating degree days that were 8.1% fewer than in the prior year and 25.6% fewer than normal.
Total working gas stocks currently sit at 3,693 Bcf, or 309 Bcf below the year-ago level and 107 Bcf below the five-year average of 3,800 Bcf, after the EIA reported a 33-Bcf withdrawal during the week to Nov. 24. A storage draw at this week's consensus would leave overall inventories at 3,686 Bcf, shrinking both the year-on-five-year-average deficit to 45 Bcf and the year-over-year deficit to 273 Bcf.
Running against downside pressure from storage outlooks, weather forecasts continue to reflect colder conditions across major heat-consuming regions that should bolster natural gas demand for heating in the coming weeks.
Updated National Weather Service projections show below-average temperatures enveloping the eastern third of the U.S. in the six- to 10-day period, before receding from the lower fringes of the Southeast but overtaking portions of the west-north-central U.S. in the eight- to 14-day period.
Above-average temperatures hold over a majority of the country's western half through both periods, as average temperatures span the midsection of the U.S. in the shorter-range view before shifting in scope in the central U.S. and spilling into the edges of the Southeast vacated by the cold further out.
In cash trade, price action for next-day natural gas predominantly favored the upside Dec. 6.
Among the key delivery locations, Transco Zone 6 NY day-ahead gas prices led the charge higher with a 29-cent gain on average at an index at $3.260/MMBtu. Benchmark Henry Hub spot gas price activity followed with a roughly 14-cent increase in deals averaging at $3.000/MMBtu, then PG&E Gate cash gas pricing that rose by near 3 cents to an index at $2.974/MMBtu and Chicago hub action that tacked on about 2 cents on the session to average at $2.911/MMBtu.
Regional averages were flat to stronger. Next-day gas pricing in the Northeast logged an almost 33-cent increase in transactions averaging at $3.262/MMBtu, as cash gas price action in the Gulf producing region added near 5 cents to average at $2.857/MMBtu. Day-ahead gas price activity in the West was flat day on day at an index at $2.777/MMBtu, while spot gas prices in the Midwest were up roughly 7 cents on average at an index at $2.792/MMBtu.
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