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January 2017 gas adds more value amid impending cold

After a finish 12.4 cents higher at $3.662/MMBtu ahead of the long Christmas holiday weekend, January 2017 natural gas futures extended gains in overnight trading leading up to the Tuesday, Dec. 27, open, amid expanding cold in forecasts that should boost heating demand in the coming weeks and allow for a continuation of the accelerated rate of storage erosion of late.

At last glance, January 2017 natural gas futures were trading 7.7 cents higher at $3.739/MMBtu.

In its updated forecast, the National Weather Service sees below-average temperatures spanning about half of the Midwest, fringes of the Gulf Coast and a majority of the West in the upcoming six- to 10-day period, as average temperatures span the balance of the Midwest and a narrow band stretching from the Gulf Coast into the Southwest. Above-average temperatures grip the Northeast, Mid-Atlantic, Southeast, most of the Gulf Coast and a patch of the Southwest.

Further out to the eight- to 14-day period, below-average temperatures spread to overtake the bulk of the country, as above-average temperatures shrink in scope to be confined to the upper tier of the Northeast and a small section of the Southeast. Average temperatures shift in scope to settle over a few areas of the East Coast and southern U.S.

Should the projected cold weather materialize, heating demand should strengthen and allow for additional large withdrawals from storage in the weeks ahead.

Working natural gas in storage notched its second triple-digit drawdown during the week ended Dec. 16, for which the U.S. Energy Information Administration outlined a 209-Bcf pull that left total stocks at 3,597 Bcf, or 226 Bcf below the same week in 2015 and 78 Bcf above the five-year average of 3,519 Bcf.

Colder weather that drove up heating demand allowed for the impressive drawdown that exceeded the full range of estimates coming into the day and surpassed both the 101-Bcf five-year average withdrawal and a 33-Bcf pull during the same week in 2015. It bested the 147-Bcf drawdown for the week ended Dec. 9 that was the first triple-digit draw of the season.

At the cash markets, traders booked a revised natural gas offering on Dec. 23 for a four-day delivery from Saturday through Tuesday to accommodate business closures in observance of the Christmas holiday on Monday, Dec. 26. Price activity was mixed amid anticipation of diverging demand through and coming off the long holiday weekend.

Looking at the key hubs, Transco Zone 6 NY spot gas pricing notched a near 6-cent decline as it averaged at $3.250/MMBtu, while Chicago next-day gas price action floundered by less than 1 cent to an index almost unchanged day on day at $3.533/MMBtu. Conversely, PG&E Gate day-ahead gas price activity was lifted by roughly 9 cents in deals averaging at $3.856/MMBtu, as benchmark Henry Hub cash gas prices advanced by about 2 cents on average to an index at $3.596/MMBtu.

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In regional terms, Northeast day-ahead gas price action tumbled by nearly 62 cents to an index at $3.881/MMBtu, as Midwest spot gas prices advanced by around 2 cents on average to an index at $3.426/MMBtu. West Coast cash gas pricing logged a better-than-6-cent gain in transactions averaging $3.364/MMBtu, as Gulf Coast next-day gas price activity tacked on 1 cent to average at $3.471/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.