After finishing the previous session 10.6 cents lower at $3.434/MMBtu, January 2017 natural gas futures were extending the downside overnight ahead of the Friday, Dec. 16, open. The contract was last seen 6.4 cents lower at $3.370/MMBtu.
The market once again failed to hold the upside and took a decided turn lower in the previous session despite the report of the first triple-digit withdrawal from natural gas inventories of the season. The data outlined a 147-Bcf withdrawal from the natural gas supply in the Lower 48 for the week to Dec. 9. The drawdown was above market consensus that called for a 132-Bcf withdrawal, and was well above the previous week's withdrawal of 42 Bcf, as well as the five-year average withdrawal of 79 Bcf and the 46-Bcf withdrawal reported for the same week in 2015.
The withdrawal brought the total U.S. working gas supply to 3,806 Bcf, turning the year-on-year surplus to a deficit of 50 Bcf and shrinking the year-on-five-year average storage surplus to 186 Bcf.
Despite the large withdrawal, traders continue to look to weather for support and are finding little to drive upside from the latest revisions to weather outlooks for the upcoming six- to 10-day and eight- to 14-day periods, as well as from longer-range projections.
The six- to 10-day and eight- to 14-day weather maps from the National Oceanic and Atmospheric Administration show that above-average temperatures will engulf the eastern half of the country including the major heating Northeast and Midwest markets.
Longer-range, the January-March three-month outlook from the NOAA shows above-average temperatures spanning the eastern quarter of the U.S. and spreading across the lower tier of the country.
Weather as forecast would pull back heating demand and allow more natural gas to remain in storage facilities, quieting market concerns for end-of-March natural gas inventories. Participants have of late been revising lower their end-of-season outlooks on the anticipation that storage withdrawals would continue exceeding historical averages and rapidly eat away at the natural gas supply.
Before the expected pull back in demand and return to smaller storage pulls, participants are expecting another large withdrawal when the EIA releases its next report covering the current week to Dec. 16.
An early survey of traders and analysts shows the expectation of a storage withdrawal spanning 177 Bcf to 204 Bcf. The pull will compare against a 101-Bcf five-year average withdrawal and the modest 33-Bcf withdrawal reported during the corresponding week in 2015.
Spot gas markets were mixed in the Thursday session, as deals done for Friday flow were influenced by regional demand projections, an ease in pipeline flows and natural gas futures.
After suffering some significant constraints, an ease in flow on pipelines in the Northeast allowed for a correction lower for natural gas moved for Friday at Transco Zone 6 NY. The market was $11.25 lower to an index at $7.080/MMBtu. Chicago traded lower as well, edging 1.1 cents lower to an index at $3.664/MMBtu. Elsewhere, hub values were higher as Henry Hub added 0.6 cent to an index at $3.559/MMBtu and PG&E Gate marched 3.4 cents higher to $3.682/MMBtu.
Regionally, the Northeast hubs averaged a $1.69 loss to an index at $5.655/MMBtu, the Gulf Coast slipped 9.8 cents to an average at $3.461/MMBtu and the Midcontinent shed 3.0 cents to an index at $3.517/MMBtu. The West added a modest 3.4 cents to an index at $3.403/MMBtu.
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.