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January natural gas futures pare earlier gains, end week higher

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January natural gas futures pare earlier gains, end week higher

NYMEX January 2018 natural gas futures recovered some of its prior-day losses but could not sustain earlier highs Friday, Dec. 1, ending the week's final session 3.6 cents higher at $3.061/MMBtu.

After ending the prior session down 15.4 cents at $3.025/MMBtu, the market swung to a $3.117/MMBtu high overnight amid prospects for colder weather outlooks, but failed to retain the premium.

National Weather Service projections continue to reflect below-average temperatures over small areas in the West and the bulk of the country's eastern two-thirds through both the upcoming six- to 10-day and eight- to 14-day periods. Above-average temperatures forecast for Maine and much of the West in the shorter-range view shift in scope to encompass nearly the entire West and the fringes of the Midwest further out, as average temperatures settle over the balance of the country.

SNL Image

SNL Image

Colder weather on tap for the major heat-consuming regions in the central and eastern U.S. should ramp up natural gas demand for heating, which should accelerate the pace of storage erosion going forward.

The natural gas market crumbled Nov. 30 on profit taking and selling, as natural gas inventories continued to draw lower but at a lackluster rate during the week ended Nov. 24, for which the U.S. Energy Information Administration outlined a net 33-Bcf withdrawal that left total working gas stocks at 3,693 Bcf, or 309 Bcf below the year-ago level and 107 Bcf below the five-year average of 3,800 Bcf.

Milder weather that drove down demand for natural gas allowed for the reported pull from stocks that was a downside miss against the anticipated 38-Bcf drawdown and below both the 43-Bcf year-ago draw and the 47-Bcf five-year average withdrawal.

Ongoing demand weakness into the close of November could encourage an additional modest storage draw when the next inventory data that will cover the current week to Dec. 1 is released, before colder weather allows for a step up in rate of weekly pulls from stocks.

The EIA's latest "Natural Gas Weekly Update" for the week ended Nov. 29, much of which will be reflected in the subsequent storage report, shows that total U.S. gas consumption fell by 6% week on week, from 71.2 Bcf/d to 67.0 Bcf/d, amid reduced consumption across most sectors. Overall U.S. gas supply was up 1% over the same period at 81.9 Bcf/d, on the back of increased production.

In cash action, the price of natural gas for day-ahead flow was predominantly tethered to the downside Dec. 1 as the three-day product covering Dec. 2-4 features softer weekend demand.

In the Northeast, spot prices at Transco Zone 6 dropped 45 cents to an index just below $2.50, while TETCO M3 fell more than 15 cents to average in the $2.30s.

In the central U.S., Chicago spot prices slipped about 5 cents to an index below $2.75, while Henry Hub in Louisiana was down 10 cents to an average near $2.80.

In the West, PG&E Citygate kept the losses to mere pennies with an index atop $3.00, while Malin held flat ant an index near $2.55.

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 and coal index prices, as well as forwards and futures, visit our Commodities Pages.