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January 2018 natural gas extends retreat absent cold weather

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January 2018 natural gas extends retreat absent cold weather

NYMEX January 2018 natural gas futures posted another day of losses Tuesday, Dec. 5, pressured by healthy supply outlooks and despite the anticipated boost in demand associated with cold weather moving into the Northeast and Midwest in the midrange period. The contract settled 7.1 cents lower at $2.914/MMBtu.

The latest revisions to weather outlooks for the six- to 10-day and eight- to 14-day periods from the National Weather Service show fewer areas of below-average temperatures. Below-average temperatures are forecast to blanket the majority of the eastern third of the U.S., while above-average temperatures blanket a little more than the western third of the U.S., leaving a band of normal temperatures separating the two extremes in the six- to 10-day period.

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Longer-range, the below-average temperatures recede to include a smaller portion of the eastern U.S., while the area of average temperatures expands to include a portion of the central U.S. and Southeast. Above-average temperatures continue to dominate in the West.

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Although some cooler weather is expected to boost demand for heating in the major consuming markets in the East, recent mild weather conditions have delayed the ramp-up of heating demand sufficiently enough to limit natural gas inventory erosion.

The natural gas supply fell by a modest 33 Bcf in the week to Nov. 24, a pull that was below market expectations that called for a storage pull of 38 Bcf as well as below the 43-Bcf year-ago pull and the 47-Bcf five-year average withdrawal.

More mild weather in the week to Dec. 1 is expected to result in another modest withdrawal from stocks as demand remained lackluster.

Total U.S. natural gas consumption fell 6% week on week in the period to Nov. 29, which will be reflected in the upcoming inventory report for the week to Dec. 1. Residential and commercial sector consumption declined by 10% during the review period as the result of mild weather sapping heating demand. Power generation consumption slipped 5% during the period, and industrial sector consumption slipped by 1% week over week, according to the U.S. Energy Information Administration's "Natural Gas Weekly Update."

Early outlooks for the storage report due out at 10:30 a.m. ET on Dec. 7 range from withdrawals of 7 Bcf to 11 Bcf, which will compare with a 69-Bcf five-year average withdrawal and the 43-Bcf withdrawal reported for the corresponding week in 2016.

The healthy natural gas supply keeps downside risk viable as the market awaits a sustained period of cold weather to lift demand and accelerate the pace of storage erosion.

Day-ahead markets, meanwhile, were boosted by the expectation of stronger demand at midweek.

Trades for Wednesday delivery at Transco Zone 6 NY were more than 10 cents higher to an index atop $2.95, Tetco-M3 added about 20 cents to an index near $2.65, Henry Hub bucked the trend with a loss of nearly 5 cents to an index near $2.84, while Waha jumped about 10 cents and Chicago gained about 5 cents to indexes near $2.75 and $2.90, respectively. In the West, SoCal Border traded a sharp near 50 cents higher to an index near $3.50, while PG&E Gate tumbled nearly 10 cents to about $2.95.

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.