After extending 5.0 cents higher in the prior session to settle at $3.382/MMBtu, February natural gas futures lost footing overnight ahead of the Friday, Jan. 27, open and the contract's roll off the board at the close of business amid sentiment of overbought conditions. Holding in the negative throughout the overnight session, the contract was last seen 11.6 cents lower at $3.266/MMBtu.
February natural gas futures gained a total of 17.8 cents over a four-day rally that began Jan. 23, but this recent winning streak has been cut short amid technical selling, despite some lingering fundamental support offered by weather outlooks.
The latest National Weather Service projections show below-average temperatures holding over the Northeast, the Mid-Atlantic, small areas of the Midwest and parts of the Northwest in the upcoming six- to 10-day period, before overtaking nearly the entire northern tier of the country and portions of the Southwest further out to the eight- to 14-day period. Average temperatures equating to seasonable weather that are scattered over the East, Midwest and West in the near term become contained to a narrow band along the midsection of the U.S. in the longer-range period.
Meanwhile, above-average temperatures are forecast to be contained to the lower tier of the U.S. through both the six- to 10-day and eight- to 14-day periods.
Colder weather in store for the major heat-consuming regions of the Northeast and Midwest should drive support for natural gas demand for heating and ongoing storage erosion in the weeks ahead. However, market participants considering the days left in the peak of the winter heating season expect that the most significant cold and subsequently the largest weekly storage draws have already been booked. The largest storage withdrawal of the season thus far was the 243-Bcf drawdown reported by the U.S. Energy Information Administration for the week ended Jan. 13.
This was followed by a net 119-Bcf withdrawal from stocks reported by the EIA in its latest storage data for the week to Jan. 20, signaling a significant pullback in the rate of weekly draws. It was below the average anticipated 121-Bcf pull, as well as both the 176-Bcf five-year-average drawdown and the 202-Bcf draw seen in the corresponding week in 2016.
The most recent storage withdrawal left total working gas in storage at 2,798 Bcf, trimming deficits to the year-ago level and five-year average to 348 Bcf and 20 Bcf, respectively.
Supply/demand data from the EIA fuels the potential for additional relatively modest storage draws in the subsequent inventory data, as the agency's latest "Natural Gas Weekly Update" for the week to Jan. 25, much of which will be reflected in the upcoming storage report, shows total U.S. gas consumption extending 8% lower week over week, as supply remained flat.
Diminished demand should limit withdrawals from the existing gas stocks and allow more natural gas production to be diverted to underground storage facilities, encouraging total stocks to remain more than adequate to meet demand through the remainder of the winter heating season and into the next shoulder season.
In cash trading, predominantly supportive weather prospects bolstered price activity for natural gas booked Thursday for Friday flow.
Across the key delivery locations, the charge higher was led by benchmark Henry Hub spot gas pricing that rose by about 18 cents to an index at $3.441/MMBtu. Transco Zone 6 NY day-ahead gas price action followed with a 16-cent gain in deals averaging at $3.340/MMBtu, then Chicago hub activity that added roughly 11 cents on the session to average at $3.337/MMBtu and PG&E Gate next-day gas prices that advanced by almost 9 cents on average to an index at $3.757/MMBtu.
Regionally, Gulf Coast cash gas price activity tacked on about 17 cents to average at $3.323/MMBtu, while Northeast next-day gas pricing was lifted by roughly 19 cents to an index at $3.473/MMBtu. Midwest day-ahead gas prices climbed by about 13 cents on average to an index at $3.293/MMBtu, as West Coast spot gas price action notched a near 10-cent increase in trades averaging at $3.244/MMBtu.
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