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January 2017 natural gas gains ahead of storage report

January 2017 natural gas futures ended a two-day losing streak Wednesday, Dec. 14, as traders positioned ahead of the release of storage data that is expected to outline a large withdrawal for the week to Dec. 9. Book squaring ahead of the new year is contributing to market volatility. The contract seesawed throughout the midweek session between $3.444/MMBtu and $3.569/MMBtu and settled 6.6 cents higher at $3.540/MMBtu.

Cold weather-driven demand and a drop in production, due in part to freeze-offs, are expected to have combined to drive an impressive storage withdrawal in the U.S. Energy Information Administration's Dec. 15 report.

Data will be released at 10:30 a.m. ET and is expected to outline a pull from stocks ranging from 117 Bcf to 144 Bcf, with a consensus formed at a 132-Bcf withdrawal. The fourth drawdown of the season will accelerate the rate of storage erosion following a 42-Bcf pull from stocks in the week to Dec. 2 and will be well above historical averages.

At the consensus, the pull would cut the total working gas supply to 3,821 Bcf from the 3,953 Bcf in the previous week and would turn the storage surplus to the year-ago level to a storage deficit of 35 Bcf, while cutting the year-on-five-year average storage surplus to 201 Bcf.

At this higher rate of storage erosion, market analysts expect the surplus to the five-year average to be erased by the end of December, if weather conditions promote strong demand.

The latest revisions to weather maps from the National Oceanic and Atmospheric Administration are less supportive of strong demand going forward than previous outlooks. For the six- to 10-day period, the Northeast and Midwest will see a mix of average and above-average temperatures that change in the eight- to 14-day period to above-average temperatures across both major heating regions.

SNL Image

SNL Image

The revised weather outlooks helped to limit the day's gains and could support ongoing price uncertainty and a retracement of the day's gains in the near-term.

At the cash gas markets prices for gas delivery to major hubs in the Northeast surged as load projections climb. At Transco Zone 6 NY, next-day deals surged about $15.00 to an index atop $20.00, and Tetco-M3 traded about $5.00 higher to an index near $8.75.

Transcontinental Gas Pipe Line Co. LLC reported constrained operations on the Transco pipeline and issued an operational flow order for Thursday at Zones 4, 5 and 6, to ensure system integrity, maintain safe operations, manage imbalances and handle within the day volatility. The company reported Dec. 12 that an unplanned outage and fire at the Wharton Storage facility near Wharton, Pa., may have an impact on the availability of GSS storage services, including withdrawals.

Algonquin Gas Transmission LLC issued a critical notice effective Dec. 15. AGT said it approved and scheduled nominations at each pipeline segment and meter station up to its operational capacity and was forced to restrict several locations due to requested nominations exceeding AGT's operation capacity.

Natural gas moved at Algonquin jumped about $2.00 to an index atop $12.00.

Elsewhere, natural gas came under pressure from demand requirements and prior-day losses in natural gas futures.

Henry Hub trades stumbled nearly 10 cents to an average around $3.50, Waha slipped about 10 cents to an index below $3.40 and Chicago gave back about 1 cent to an index near $3.75. A near 10-cent loss at the SoCal Border brought the index there to below $3.50, and PG&E Gate slipped more than 5 cents to an index around $3.65.

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.