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January natural gas climbs overnight in buying at lows

Following a finish 15.9 cents lower on the session Dec. 7 at $2.763/MMBtu, NYMEX January 2018 natural gas was trading higher ahead of the Friday, Dec. 8, open, as traders took advantage and bought at the lows. At 7:39 a.m. ET, the January 2018 natural gas futures contract was up 5.3 cents to $2.816/MMBtu.

The U.S. Energy Information Administration reported a net 2-Bcf injection into natural gas inventories in the Lower 48 during the week ended Dec. 1 that defied market expectations and historical averages and drove the downside in the previous session.

The market consensus ahead of the report's release called for a 7-Bcf drawdown from stocks, against respective year-ago and five-year average withdrawals of 43 Bcf and 69 Bcf. The build brought total U.S. working gas supply to 3,695 Bcf, or 264 Bcf below the year-ago level and 36 Bcf below the five-year average storage level of 3,731 Bcf.

The lackluster pace of withdrawals over recent weeks is keeping the market well supplied, but colder weather in the midrange forecasts provides some counter support helping the market back higher.

According to the EIA's latest "Natural Gas Weekly Update" for the week ended Dec. 6, much of which will be reflected in the next storage report that will cover the current week to Dec. 8, total U.S. gas consumption climbed 8% week on week amid stronger consumption across major sectors, while dry production slumped by 1%.

Rising demand for natural gas alongside diminished production should ramp up the rate of weekly storage draws.

Further, the latest weather map for the six- to 10-day period from the National Weather Service shows below-average temperatures across the majority of the eastern third of the country, above-average temperatures spanning beyond the western third of the country and a band of average temperatures in the central U.S. splitting the areas of extremes.

In the eight- to 14-day outlook the area of below-average temperatures shrinks to include a smaller portion of the eastern U.S., while the area of average temperatures in the central U.S. shifts to encompass a portion of the southeast. Above-average temperatures stretch to encompass more than half of the country.

Whether the market can maintain an upside bias will depend on the sustainability of the cold weather.

"The 'cold blast' tends to trigger fast, short-lived, short-covering rallies that end with a thud. What a bullish speculator wants to see are the words and phrases like 'lingering cold,' 'hard freeze' or 'cold pressure dome' in the forecast," FX Empire analyst James Hyerczyk said.

Longer-range, milder weather is expected to return and natural gas demand is likely to drop to normal or below-normal, Hyerczyk said.

The value of natural gas moved in day-ahead trade was mixed by weather and demand in deals done for Friday delivery.

At the key hubs Transco Zone 6 NY added 76.8 cents to drive the index to $4.028/MMBtu, while other hubs retreated lead by Chicago which shed 20.3 cents to an index at $2.708/MMBtu, the Henry Hub was 18.8 cents lower to $2.812/MMBtu and PG&E Gate slipped 7.0 cents to an index at $2.904/MMBtu.

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Losses dominated on a regional basis as the Midcontinent tumbled 13.7 cents to an index at $2.655/MMBtu, the West shed 13.3 cents to $2.644/MMBtu, the Gulf Coast gave back 8.3 cents to $2.774/MMBtu and the Northeast shed 2.9 cents to an index at $3.233/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 index prices, as well as forwards and futures, visit our Commodities pages.