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January 2018 gas drifts amid varied fundamentals

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January 2018 gas drifts amid varied fundamentals

After ending the week's opening session down 7.6 cents at $2.985/MMBtu, NYMEX January 2018 natural gas futures clawed up overnight before reversing gains ahead of the Tuesday, Dec. 5, open, as traders consider supportive weather against supply. Colder weather outlooks for major heating regions support the upside, while the recent and impending lackluster pace of storage erosion is keeping pressure on the market. At 6:50 a.m. ET, the contract was 5.2 cents lower at $2.933/MMBtu while trading a range from $2.931/MMBtu to $2.998/MMBtu.

Updated National Weather Service projections for the six- to 10-day and eight- to 14-day periods continue to show the country split between below-average temperatures over the entire eastern half of the U.S. and above-average temperatures over the bulk of western U.S., with a narrow swath of average temperatures over the central U.S.

Cold weather in store for the major heat-consuming regions in the eastern U.S. should boost natural gas demand for heating and ramp up the rate of weekly withdrawals from stocks going forward.

Ahead of weather-related demand support, however, recent mild conditions that drove down demand for natural gas is seen to have allowed for a modest rate of storage withdrawals of late.

A dearth of weather-driven demand is seen to have encouraged a 33-Bcf drawdown for the week ended Nov. 24 that was a downside miss against consensus estimates and below both the 43-Bcf year-ago pull and the 47-Bcf five-year average withdrawal. It left total working gas stocks at 3,693 Bcf, or 309 Bcf below the year-ago level and 107 Bcf below the five-year average of 3,800 Bcf.

Additional moderate weather that kept demand weak into the close of November is seen to allow for another lackluster pull from stock when the next weekly inventory data is released Dec. 7 that will cover the week ended Dec. 1.

The U.S. Energy Information Administration's latest "Natural Gas Weekly Update" for the week ended Nov. 29, much of which will be reflected in the subsequent storage report, shows that total U.S. gas consumption fell by 6% week on week due to reduced consumption across most sectors amid warmer weather. Dry gas production during the same period climbed by 1% relative to the week-ago figure.

Diminished demand and strong production is expected to have allowed for more natural gas to remain in underground storage facilities.

In cash trade, the natural gas offering moved for Tuesday flow added value in much of the country.

Looking at the key hubs, a near 41-cent gain steered Transco Zone 6 NY day-ahead gas pricing to an index at $2.854/MMBtu, as a 14-cent increase drove Chicago next-day gas price action to an average at $2.865/MMBtu. A roughly 7-cent advance took benchmark Henry Hub spot gas price activity to an index at $2.906/MMBtu, as an almost 2-cent uptick nudged PG&E Gate hub pricing to an average at $3.033/MMBtu.

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Regionally, Northeast cash gas price action logged an approximately 16-cent increase in deals averaging at $2.791/MMBtu, as Midwest day-ahead gas prices rose by 13 cents on average to an index at $2.721/MMBtu. Gulf Coast spot gas pricing climbed by about 3 cents to an index at $2.795/MMBtu, as West Coast next-day gas price activity picked up almost 22 cents on the session to average at $2.702/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.