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January 2018 natural gas futures regains ground ahead of weekend

After slumping 3.1 cents in the prior session, January 2018 natural gas futures reclaimed some ground overnight ahead of the Friday, Dec. 15, session, as colder weather ahead is expected to boost heating demand and cut into inventories.

At 7:12 a.m. ET, NYMEX January 2018 natural gas futures were trading at $2.724/MMBtu, up 4.0 cents overnight, after ranging between $2.668/MMBtu and $2.732/MMBtu.

The U.S. Energy Information Administration on Dec. 14 reported a net 69 Bcf was pulled from natural gas storage in the Lower 48 during the week ended Dec. 8, leaving total U.S. working gas supply at 3,626 Bcf, or 201 Bcf below the year-ago level and 27 Bcf below the five-year average storage level of 3,653 Bcf.

Although analysts and traders surveyed had anticipated a 60-Bcf pull from storage for the period, the latest figure still came in below a 132-Bcf year-ago pull and the 78-Bcf five-year average withdrawal.

"Even though the weekly EIA inventory snapshot showed a larger than expected draw from inventory market participants remain unimpressed with seemingly no current desire to move into a long side profile. Even the improvement of the 11/15 day forecast to a more supportive outlook for Nat Gas heating related demand resulted in no change in most trader's market sentiment for the short term," Energy Management Institute principal Dominick Chirichella said in a Dec. 14 note to clients.

According to the National Weather Service, normal to below-normal temperatures are eyed for the northern tier of the country during the six- to 10-day period. Above-average conditions are projected for the southern half of the country during this same period.

In the eight- to 14-day timeframe, the agency is calling for widespread below-normal temperatures, with above-average readings seen only in California, parts of the Southwest, including Texas, and areas of the Southeast, including Florida.

According to the American Gas Association, domestic dry gas production has been averaging 76 Bcf/d, which is about 8%, or almost 6 Bcf/d, above levels recorded in December 2016. However, gas demand climbed above 100 Bcf on Dec. 8.

"Could we set a new daily peak day this winter? The US just missed setting a record in early January 2017, where peak daily demand of 135 Bcf fell short of the 139 Bcf record established three years earlier. The difference this year is even higher structural demand in the market including current pipeline and LNG exports, small but consistent increases in industrial demand and, of course, the ever-present demand for natural gas for power generation," the AGA said Dec. 14 in its monthly Natural Gas Market Indicators report.

According to the EIA, total supply of natural gas remained steady in the week ended Dec. 13, averaging 82.0 Bcf/d while demand climbed significantly. Total U.S. consumption of natural gas rose by 27% compared with the previous report week, according to the agency's Natural Gas Weekly Update.

At the cash markets, declining demand forecasts encouraged losses to prevail in price activity for natural gas moved for Friday flow.

Among the key delivery locations, Transco Zone 6 NY spot gas prices led the decline with a 9.2-cent drop on average to an index at $4.028/MMBtu. Benchmark Henry Hub next-day gas pricing bucked the trend with a 1.1-cent increase in deals averaging at $2.812/MMBtu, while Chicago hub action unraveled 0.6 cent to average at $2.708/MMBtu and PG&E Gate cash gas price activity fell about 4.3 cents to an index at $2.904/MMBtu.

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On a regional basis, Northeast day-ahead gas price action deflated by 49.9 cents in trades averaging at $3.233/MMBtu, as Gulf Coast spot gas pricing shed just 0.5 cent to average at $2.774/MMBtu. Midwest cash gas price activity increased by approximately 3.1 cents to an index at $2.655/MMBtu, as West Coast next-day gas prices slipped by about 2.4 cents on average to an index at $2.644/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, natural gas and coal index prices, as well as forwards and futures, visit our Commodities pages.