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February natural gas searches for direction ahead of midweek open

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February natural gas searches for direction ahead of midweek open

Following a finish 3.6 cents higher at $3.279/MMBtu, February natural gas moved on either side of the prior day's settle overnight, searching for direction with changes in weather forecasts providing modest upside support, and with the anticipation of a step down in the rate of storage withdrawals when the EIA releases its next inventory report. The contract moved from $3.255/MMBtu to $3.298/MMBtu ahead of the Wednesday, Jan. 25, open, and was last seen 0.6 cent higher on the day at $3.285/MMBtu.

The six- to 10-day weather forecast from the National Oceanic and Atmospheric Administration shows average temperatures in the Northeast, Mid-Atlantic, portions of the Midwest, areas in the Gulf, as well as in portions of the north-central and West. Below-average temperatures grip the Southeast, portions of the Gulf and an area in the Northwest, while above-average temperatures span a portion of the central U.S. and a portion of the Southwest.

Further out in the eight- to 14-day period, NOAA forecasts a shift, with below-average temperatures reaching the Northeast and portions of the Mid-Atlantic, as well as engulfing a small portion of the west-north-central U.S. and a large area in the West. Average temperatures overtake a small portion of the Southeast and span across the northwest and into the Southwest, while above-average temperatures grip the majority of the lower tier of the country.

As forecast, weather offers modest support as below-average and average temperatures in the major heat-consuming markets through both periods should offer demand-side support.

Natural gas inventories, however, are expected to have already put in the largest withdrawal of the season, and after a 243-Bcf pull from stocks for the week to Jan. 13, inventories are expected to continue to erode, but at a slower pace.

Natural gas consumption data in the EIA's latest "Natural Gas Weekly Update" shows that for the review week to Jan. 18, total U.S. consumption of natural gas fell 22% compared with the previous report week, with power burn down 22% week over week, industrial-sector consumption 7% lower and residential- and commercial-sector consumption off 29%. Additionally, natural gas exports to Mexico decreased 4%.

Consequently, for the upcoming storage report due out at 10:30 a.m. ET on Thursday, Jan. 26, and covering the week to Jan. 20, analysts and traders expect a withdrawal spanning the 110s Bcf to the upper 120s Bcf, according to an early survey. A pull within the range of expectations would be a significant step down from the prior week's withdrawal.

After 243 Bcf was withdrawn from storage facilities in the prior week, stocks sit at 2,917 Bcf, with deficits to the year-ago level and five-year average pegged at 431 Bcf and 77 Bcf, respectively.

This week's withdrawal will compare against a 176-Bcf five-year-average pull and a 202-Bcf drawdown for the same week in 2016.

In day-ahead trade, markets were ushered higher by weather and demand projections in deals done for Wednesday delivery.

At the major delivery hubs, Transco Zone 6 NY added 2.5 cents to an index at $3.085/MMBtu, Henry Hub deals were 12.2 cents higher to an index at $3.284/MMBtu, Chicago gained 12.5 cents to an index at $3.285/MMBtu and PG&E Gate added 18.4 cents to $3.626/MMBtu.

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Regionally, the Northeast gained 7.3 cents to an index at $3.296/MMBtu, and the Gulf Coast gained 10.4 cents to average at $3.140/MMBtu. In the Midcontinent, a gain of 14.4 cents brought the index to $3.165/MMBtu, while the West saw a 11.4-cent gain to an index at $3.145/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.