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January 2018 gas futures rise on supportive weather

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January 2018 gas futures rise on supportive weather

After settling 7.2 cents lower at $2.612/MMBtu ahead of the weekend, NYMEX January 2018 natural gas futures were higher overnight leading up to the Monday, Dec. 18, open, as stronger demand associated with recent and imminent cold weather looked to ramp up the pace of storage erosion in the weeks ahead. At 6:50 a.m. ET, the contract was 7.6 cents higher at $2.688/MMBtu.

A cold front that moved across the country is seen to have contributed to a substantial increase in demand for natural gas of late, with the U.S. Energy Information Administration's most recent "Natural Gas Weekly Update" for the week ended Dec. 13 detailing a 27% week-on-week gain in total U.S. gas consumption that was led by a 50% surge in residential/commercial-sector demand. Dry production during the week was flat.

Additional cold weather forecast for a majority of the country through late December should keep heating-related demand for natural gas elevated going forward.

Updated National Weather Service outlooks show below-average temperatures encompassing most of the West and nearly the entire central U.S. in the six- to 10-day period before spilling into the bulk of the eastern U.S. in the eight- to 14-day period.

Average temperatures that span portions of the country's eastern third and the Southwest in the shorter-range view shift and shrink in scope to be contained to a few areas of the Southeast and other parts of the Southwest further out. Above-average temperatures that settle over parts of the East Coast initially become confined to small patches of the southern U.S. in the extended period.

Recent and impending weather-related demand support should encourage a further acceleration in the rate of weekly inventory withdrawals, following the larger-than-expected but still below-average drawdown in the latest storage report week.

Natural gas inventories notched a drawdown of 69 Bcf during the EIA's latest storage report week ended Dec. 8, which bested the average anticipated 60-Bcf pull from stocks but trailed both the 132-Bcf year-ago draw and the 78-Bcf five-year average withdrawal. It left total working gas stocks at 3,626 Bcf, or 201 Bcf below the year-ago level and 27 Bcf below the five-year average of 3,653 Bcf.

At the cash markets, the natural gas offering Dec. 15 that was revised for Saturday-through-Monday flow was moved at predominantly reduced values amid pressure from the weekend inclusion in the package.

Among the key delivery locations, Transco Zone 6 NY day-ahead gas prices led the charge lower with a near $1.25 decline on average to an index at $3.192/MMBtu. Benchmark Henry Hub spot gas price action followed with a roughly 9-cent slump in deals averaging at $2.600/MMBtu, then Chicago cash gas pricing that faltered by about 6 cents to an index at $2.554/MMBtu and PG&E Gate hub activity that shed 2 cents to average at $2.845/MMBtu.

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In regional terms, Northeast next-day gas pricing tumbled by approximately 35 cents to an index at $3.371/MMBtu, as Gulf Coast cash gas prices slid by almost 6 cents on average to an index at $2.555/MMBtu. Midwest spot gas price activity deflated by about 9 cents in trades averaging at $2.438/MMBtu, as West Coast day-ahead gas price action unraveled less than 1 cent on the session to average at $2.451/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.