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February 2018 natural gas futures advance ahead of 1st day in lead

Taking the lead from the January 2018 natural gas contract that rolled off the board in the prior session with a 9.5-cent gain at a finish at $2.738/MMBtu, NYMEX February 2018 natural gas futures favored the upside overnight ahead of the Thursday, Dec. 28, open, as supportive weather prospects undermined bearish storage expectations. At 6:59 a.m. ET (1159 GMT) the contract was 9.4 cents higher at $2.825/MMBtu.

Market participants anticipate a pull from stocks below the prior-week figure and historical averages when the U.S. Energy Information Administration releases its next weekly inventory data at 10:30 a.m. ET on Thursday, as weather during the week in review is seen to have sapped heating demand.

Estimates for the forthcoming storage report that will cover the week ended Dec. 22 call for a drawdown of anywhere from 103 Bcf to 114 Bcf, with consensus formed at a 109-Bcf withdrawal. This would compare to a 233-Bcf year-ago draw and the 111-Bcf five-year average pull.

Degree day data from the National Oceanic and Atmospheric Administration for the week to Dec. 23 show heating degree days that were 19.2% fewer than normal and 27.3% fewer than in the previous year.

Total working gas stocks currently sit at 3,444 Bcf, or 183 Bcf below the year-ago level and 84 Bcf below the five-year average of 3,528 Bcf, after the EIA detailed a 182-Bcf withdrawal for the week to Dec. 15.

A storage draw at consensus would leave overall inventories at 3,335 Bcf, shrinking deficits to the prior-year level and five-year average to 59 Bcf and 82 Bcf, respectively.

Subsequent storage reports could, however, show a reprise of larger pulls from stocks, as colder weather in store spells stronger heating demand that would ramp up the amount of natural gas drawn from underground storage facilities.

Updated National Weather Service outlooks for both the six- to 10-day and eight- to 14-day periods show below-average temperatures stretching from nearly the entire eastern two-thirds of the country into portions of the Northwest, accompanied by average temperatures over the remainder of the central U.S. and parts of the West. Above-average temperatures are called only for much of the Southwest and the fringes of the Northwest.

Cold weather on tap for the central and eastern U.S. should boost demand for natural gas in the residential and commercial sectors, as heating requirements climb.

At the cash hubs, diverging demand expectations drove choppy price activity for natural gas booked Wednesday for Thursday flow.

In regional terms, Northeast spot gas prices tumbled by almost $4.49 on average to an index at $9.785/MMBtu, as West Coast next-day gas price activity logged a roughly 1-cent slump in deals averaging at $2.580/MMBtu. By contrast, Gulf Coast day-ahead gas price action tacked on about 21 cents on the session to average at $3.089/MMBtu, as Midwest cash gas pricing rose by nearly 16 cents to an index at $2.893/MMBtu.

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Across the key delivery locations, however, the upside prevailed. Day-ahead gas price activity at Transco Zone 6 NY soared by approximately $5.61 to an index at $17.649/MMBtu, as PG&E Gate hub prices advanced by roughly 4 cents on average to an index at $2.886/MMBtu. Benchmark Henry Hub cash gas pricing notched a near 8-cent gain in trades averaging at $2.759/MMBtu, as Chicago next-day gas price action added about 22 cents to average at $3.151/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.