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January 2017 gas adds to gains amid impending cold weather

After ending the prior session up 9.2 cents at $3.695/MMBtu, January 2017 gas extended gains overnight ahead of the Friday, Dec. 9, open amid ongoing weather support, as colder conditions expected to boost heating demand remain dominant in forecasts. The contract was last seen trading 4.0 cents higher at $3.735/MMBtu.

National Weather Service maps for the six- to 10-day and eight- to 14-day periods show below-average temperatures blanketing nearly the entire eastern two-thirds of the U.S. and the Northwest. Average temperatures settle over portions of the southern U.S., while above-average temperatures are projected to be confined to much of the Southwest, a section of western Texas and the fringes of the Southeast.

Weather as projected spells stronger heating demand that should allow for larger withdrawals from storage, following what will likely be a brief pullback in the rate of weekly stock drawdowns. In its latest inventory report, the U.S. Energy Information Administration outlined a net 42-Bcf withdrawal from stocks for the week to Dec. 2 that signaled a slowdown in the pace of storage erosion. Although the week's data was almost at par with the average anticipated 41-Bcf drawdown, it was smaller than the 50-Bcf pull from stocks detailed by the EIA for the week ended Nov. 25 and well below both the 61-Bcf five-year average drawdown and the 69-Bcf pull seen in the corresponding week in 2015.

Weather that generated 6.5% fewer heating degree days compared to the same week last year and 15.2% fewer than normal, according to the National Oceanic and Atmospheric Administration data, is seen to have limited the amount of natural gas drawn from underground storage facilities during the week in review. Overall working gas stocks slid to 3,953 Bcf, or 51 Bcf above the year-ago level and 254 Bcf above the five-year average of 3,699 Bcf, as a result of the latest reported storage withdrawal.

For the next weekly storage data that will cover the current week to Dec. 9, market participants are already looking at an accelerated pace of storage decline as colder weather is expected to have ramped up demand. Preliminary estimates suggest withdrawals in the low 120s Bcf to as much as 140 Bcf, which would compare against a 79-Bcf five-year average pull and the 46-Bcf draw in the year ago.

The EIA's latest "Natural Gas Weekly Update" for the week ended Dec. 7, which will be partially covered in the forthcoming inventory report, shows a 15% increase in total U.S. gas consumption that supports prospects for a larger stock withdrawal.

In cash trade, the price of natural gas for day-ahead flow was tethered to the downside in much of the country amid the anticipation of predominantly softer demand leading up to the weekend.

Looking at the major delivery locations, a 15-cent decline took Chicago spot gas price activity to an index at $3.700/MMBtu, as an almost 11-cent retreat steered PG&E Gate next-day gas pricing to an average at $3.689/MMBtu and a near 12-cent reduction drove benchmark Henry Hub day-ahead gas price action to an index at $3.680/MMBtu. Running against the dominant downtrend, a better-than-8-cent increase brought Transco Zone 6 NY hub pricing to an average at $4.241/MMBtu.

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Regionally, Midwest cash gas price action notched a near 12-cent decrease in deals averaging at $3.601/MMBtu, as West Coast day-ahead gas pricing shed 11 cents on the session to average at $3.434/MMBtu. Gulf Coast spot gas prices deflated by roughly 9 cents on average to an index at $3.605/MMBtu, as Northeast next-day gas price activity jumped by 60 cents against the wider decline to an index at $5.006/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.