Following a 5.5-cent decline in the prior session to settle at $2.637/MMBtu, NYMEX January 2018 natural gas futures attempted, but failed to hold gains overnight ahead of the Thursday, Dec. 21, open and the midmorning release of the weekly storage data that is poised to show the first triple-digit pull of the season. At 7:00 a.m. ET, the contract was 0.7 cent lower at $2.630/MMBtu, while trading a range from $2.622/MMBtu to $2.662/MMBtu
Elevated demand for natural gas amid cold weather is seen to have significantly ramped up the rate of weekly storage withdrawals when the U.S. Energy Information Administration releases its next weekly inventory report at 10:30 a.m. ET on Thursday.
Traders and analysts anticipate a drawdown from stocks of anywhere from 163 Bcf to 181 Bcf for the report week ended Dec. 15, with consensus formed at a 173-Bcf withdrawal. This would compare to a 200-Bcf year-ago draw and the 125-Bcf five-year average pull.
The EIA's "Natural Gas Weekly Update" for the week ended Dec. 13, much of which will be reflected in the upcoming storage report, shows a 27% week-on-week increase in total U.S. gas consumption largely driven by a 50% surge in residential/commercial-sector demand as a cold front moved across the country.
Total working gas stocks were at 3,626 Bcf, or 201 Bcf below the year-ago level and 27 Bcf below the five-year average of 3,653 Bcf, following a 69-Bcf drawdown reported for the week to Dec. 8. A storage withdrawal at consensus would leave natural gas inventories at 3,453 Bcf.
Additional large withdrawals from storage look to be in store in the coming weeks, as temperature forecasts reflect lingering cold over a majority of the country into early January 2018.
The National Weather Service sees below-average temperatures stretching from almost the entire eastern two-thirds of the country into much of the Northwest and the fringes of the Southwest to ultimately envelop the bulk of the U.S. through both the upcoming six- to 10-day and eight- to 14-day periods. Average to above-average temperatures are called only for the remainder of the West and a few parts of the South.
Prevalent cold weather in outlooks should keep natural gas demand for heating elevated in the weeks ahead, likely to allow for a continuation of the accelerated pace of storage erosion. Longer-term weather outlooks point to a return to milder weather that should once again trim demand and limit storage pulls during peak winter months, keeping downside pressure on the market and preventing a sustained upside rally.
In cash action, day-ahead natural gas had a mixed showing Wednesday on the back of varied weather-driven demand expectations.
Looking at the key hubs, a nearly 29-cent increase steered Transco Zone 6 NY spot gas price activity to an index at $3.445/MMBtu, as a roughly 8-cent decline took Chicago next-day gas pricing to an average at $2.632/MMBtu. An approximately 5-cent reduction drove PG&E Gate hub action to an index at $2.890/MMBtu, as a roughly 3-cent slump nudged benchmark Henry Hub cash gas pricing to an average at $2.717/MMBtu.

On a regional basis, Northeast day-ahead gas price action logged an almost 32-cent gain in deals averaging at $3.909/MMBtu, as Midwest cash gas prices faltered by about 5 cents on average to an index at $2.531/MMBtu. West Coast spot gas pricing was lifted about 2 cents to an index at $2.671/MMBtu, as Gulf Coast next-day gas price activity deflated by roughly 8 cents on the session to average at $2.605/MMBtu.

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