After ending the prior session down 11.0 cents at $3.302/MMBtu, February gas advanced overnight ahead of the Thursday, Jan. 19, open and the midmorning release of the storage data that is poised to show a further acceleration in the rate of stock decline. Climbing to a $3.344/MMBtu overnight high, the contract was last seen 1.7 cents higher on the session at $3.319/MMBtu.
Estimates leading up to the 10:30 a.m. ET release of the U.S. Energy Information Administration inventory report call for a storage draw of 216 Bcf to 251 Bcf, with consensus formed at a 236-Bcf pull for the review week to Jan. 13. This would compare against a 170-Bcf five-year average drawdown and a 175-Bcf withdrawal seen in the corresponding week in 2016.
The week's data would follow the modest 49-Bcf withdrawal during the week to Dec. 30, 2016, and a subsequent 151-Bcf drawdown in the week to Jan. 6.
The larger stock draw in the forthcoming storage report is forecast despite degree day data from the National Oceanic and Atmospheric Administration that show heating degree days for the week to Jan. 14 were 6.0% fewer than in the prior year and 10.6% fewer than normal.
Total working gas stocks sit at 3,160 Bcf, or 363 Bcf below the year-ago level and 4 Bcf below the five-year average of 3,164 Bcf. A pull from stocks at consensus would leave overall inventories at 2,924 Bcf, widening the deficits to both the five-year average and the year-ago level to 70 Bcf and 424 Bcf, respectively.
Additional large storage draws could be in store in the weeks ahead amid returning weather support, as forecasts show cold conditions typical of the winter season spreading across the bulk of the country.
The National Weather Service sees average to below-average temperatures holding over portions of the west-central U.S. and the entire West in the upcoming six- to 10-day period before expanding into much of the central U.S. and most of the East to ultimately envelop a majority of the country further out to the eight- to 14-day period.
Above-average temperatures that linger over much of the country's eastern two-thirds in the near term shrink in scope to be confined to the Northeast, fringes of the Mid-Atlantic and a small section of the Midwest in the longer-range period.
Expanding cold weather should ramp up natural gas demand for heating and allow for a continuation of the heightened pace of storage erosion.
Assuming relatively normal temperatures in the first quarter of 2017, the EIA sees inventories ending the titular withdrawal season at the close of March at 1,745 Bcf, or 3.3% below the five-year average.
At the cash hubs, milder weather that trimmed demand outlooks encouraged losses to prevail in price action for day-ahead natural gas flow on Wednesday.
Across the major delivery locations, the charge to the downside was led by benchmark Henry Hub spot gas pricing that shed about 11 cents on the session to average at $3.256/MMBtu. Transco Zone 6 NY next-day gas price activity followed with a 6-cent retreat to an index at $3.190/MMBtu, then PG&E Gate hub action that notched a near 3-cent decline in trades averaging at $3.620/MMBtu and Chicago cash gas prices that eased by less than 1 cent on average to an index at $3.222/MMBtu.
On a regional basis, Gulf Coast and West Coast day-ahead gas prices deflated by almost 7 cents on average to indexes at $3.145/MMBtu and $3.067/MMBtu, respectively. Meanwhile, Northeast cash gas pricing unraveled roughly 4 cents to average at $3.286/MMBtu, as Midwest spot gas price activity logged an almost 5-cent slump in deals averaging at $3.153/MMBtu.
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