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January 2017 gas retraces higher in bargain hunting

After shedding 12.9 cents Dec. 20 to settle at $3.263/MMBtu, January 2017 gas renewed gains overnight ahead of the Wednesday, Dec. 21, open, amid buying at lows and short covering driven by the anticipation of another impressive pull from stocks when the next weekly inventory data is released. At last look early Wednesday, the contract was up 7.5 cents to $3.338/MMBtu.

The January 2017 natural gas contract has tumbled by a collective 48.3 cents since Dec. 9, but the significant losses incurred are inspiring bargain hunting.

Lending fundamental support, natural gas inventory erosion is expected to continue at an accelerated pace when the U.S. Energy Information Administration releases its next weekly storage report at 10:30 a.m. ET on Thursday, Dec. 22. Traders and analysts anticipate another triple-digit drawdown ranging from 194 Bcf to 203 Bcf, with consensus formed at a 199-Bcf pull for the review week to Dec. 16. This would compare to a 101-Bcf five-year average withdrawal and a 33-Bcf pull during the same week in 2015.

The week's data would follow the 147-Bcf withdrawal from storage reported by the EIA for the week to Dec. 9 that was the first triple-digit pull of the season. It left total working gas stocks at 3,806 Bcf, turning the year-on-year surplus to a deficit of 50 Bcf and shrinking the year-on-five-year average overhang to 186 Bcf.

The increased rate of weekly storage withdrawals looks to be short-lived, however, as midrange weather forecasts reflect milder conditions across key heating regions that should sap heating demand and limit the amount of natural gas drawn from inventories.

Updated National Weather Service forecast maps for the six- to 10-day and eight- to 14-day periods show above-average temperatures stretching over the entire East into the bulk of the central U.S. and a few parts of the Southwest to ultimately encompass a majority of the country, leaving only a small section of the Midwest and much of the West in the scope of average to below-average temperatures.

Reduced demand for natural gas amid diminished heating requirements due to predominantly mild weather in store should reverse the recent run-up in inventory erosion.

At the cash markets, the downside prevailed in price activity for natural gas booked for Wednesday flow, as predominantly weaker demand expectations conspired with ongoing losses at the futures arena.

Across the key hubs, the charge lower was led by Transco Zone 6 NY day-ahead gas pricing that collapsed by $1.92 on the session to average at $3.959/MMBtu. Chicago spot gas price action followed with a better-than-21-cent decline in trades averaging at $3.335/MMBtu, then benchmark Henry Hub cash gas prices that fell by about 16 cents on average to an index at $3.391/MMBtu, and PG&E Gate hub activity that recoiled by about 11 cents to an index at $3.605/MMBtu.

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In regional terms, Northeast cash gas price action crumbled by roughly 72 cents in deals averaging at $4.182/MMBtu, as Midwest next-day gas pricing tumbled by 27 cents to an index at $3.244/MMBtu. West Coast day-ahead gas price activity unraveled about 25 cents to average at $3.166/MMBtu, as Gulf Coast spot gas prices slid by about 19 cents on average to an index at $3.260/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.