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January 2017 gas futures sink amid weather pressure

After a settle 5.1 cents higher at $3.746/MMBtu ahead of the weekend, January 2017 gas tumbled overnight leading up to the Monday, Dec. 12, open, as moderating weather in outlooks looked to sap demand and limit the amount of natural gas drawn from stocks. The contract was last seen 19.9 cents lower at $3.547/MMBtu.

In its revised forecasts, the National Weather Service sees below-average temperatures blanketing the bulk of the country in the upcoming six- to 10-day period before significantly shrinking in scope to be confined to much of the West further out to the eight- to 14-day period.

Average temperatures, which are called for only in a narrow band spanning the fringes of the Mid-Atlantic into the edges of the Gulf Coast in the shorter-range period, overtake the Northeast, Mid-Atlantic, Midwest and portions of the West in the longer-range period as above-average temperatures reflected only for a section of the Southeast in the near term expand to encompass the entire Southeast, Gulf Coast and an area of the Southwest further out.

The onset of milder weather, especially across the major heating regions of the Northeast and Midwest, suggests reduced calls on natural gas for heating requirements that should keep a lid on the pace of storage erosion.

The withdrawal season began in the week to Nov. 18, when the U.S. Energy Information Administration reported a surprise 2-Bcf pull from storage. A sharp increase to a 50-Bcf drawdown in the week to Nov. 25 kicked the withdrawal season into full gear, but the subsequent report for the week to Dec. 2 showed a pullback in the rate of decline, as the EIA data outlined a 42-Bcf inventory draw.

The most recent storage withdrawal compared against a 61-Bcf five-year average drawdown and the 69-Bcf pull seen in the corresponding week in 2015. It took overall inventories to 3,953 Bcf, widening surpluses to the year-ago level to 51 Bcf and the five-year average to 254 Bcf.

Although colder weather to start December and in the near-term forecast suggests weather-related demand support that could drive an improvement in the rate of weekly storage withdrawals, moderating weather conditions looks to allow for a reprise of modest stock drawdowns further out.

In cash trading, the natural gas offering booked Dec. 9 for Saturday-though-Monday delivery was valued higher in much of the country, as weather outlooks bolstered demand expectations despite the typical inclusion of the low-demand weekend days in the revised package.

Looking at the major delivery locations, gains of about 15 cents on average drove PG&E Gate and Chicago spot gas prices to indexes at $3.836/MMBtu and $3.845/MMBtu, respectively, as an uptick of more than 7 cents took benchmark Henry Hub cash gas pricing to an index at $3.754/MMBtu. Running against the dominant uptrend, an almost 22-cent decline steered Transco Zone 6 NY hub action to an index at $4.022/MMBtu.

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Regional averages favored the upside overall. West Coast next-day gas price activity notched a nearly 18-cent increase in deals averaging at $3.616/MMBtu, as Midwest spot gas pricing rose by about 9 cents to an index at $3.694/MMBtu. Gulf Coast day-ahead gas price action added roughly 4 cents on the session as it averaged at $3.641/MMBtu, as Northeast cash gas prices jumped by 24 cents on average to an index at $5.246/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.