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January natural gas tumbles as storage builds

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January natural gas tumbles as storage builds

NYMEX January 2018 natural gas traded sharply lower Thursday, Dec. 7, as the natural gas inventory improved slightly week-on-week and with cold weather in the short-term expected to transition to milder weather later in December. The contract tumbled into the settle, finding a $2.759/MMBtu intraday low, and closed 15.9 cents lower on the session at $2.763/MMBtu.

The U.S. Energy Information Administration reported a net 2-Bcf injection into natural gas inventories in the Lower 48 during the week ended Dec. 1 that defied market expectations and historical averages.

The market consensus ahead of the report's release called for a 7-Bcf drawdown from stocks, against respective year-ago and five-year average withdrawals of 43 Bcf and 69 Bcf. The build brought total U.S. working gas supply to 3,695 Bcf, or 264 Bcf below the year-ago level and 36 Bcf below the five-year average storage level of 3,731 Bcf.

The lackluster pace of withdrawals over recent weeks is keeping the market well supplied and providing downside pressure on natural gas, limiting the market's response to otherwise supportive midrange weather outlooks.

Major heat consuming regions are in the grips of cold weather that is expected to mostly linger through the middle of December.

The latest weather map for the six- to 10-day period from the National Weather Service shows below-average temperatures across the majority of the eastern third of the country, above-average temperatures spanning beyond the western third of the country and a band of average temperatures in the central U.S. splitting the areas of extremes.

SNL Image

In the eight- to 14-day outlook the area of below-average temperatures shrinks to include a smaller portion of the eastern U.S., while the area of average temperatures in the central U.S. shifts to encompass a portion of the southeast. Above-average temperatures stretch to encompass more than half of the country.

SNL Image

Longer-range, milder weather is expected to return and natural gas demand is likely to drop to normal or below-normal. "That is what is driving prices lower," FX Empire analyst James Hyerczyk said.

The value of natural gas moved in day-ahead trade at some key Northeast locations was higher with the region gripped by cold weather. Elsewhere, prices came under pressure as the coldest weather moved east and with demand outlooks pointing lower.

Transco Zone 6 NY traded nearly 70-cents higher to an index atop $3.95, while trade at Tetco-M3 followed the wider downturn, sinking more than 10 cents to an index near $2.65. Deals at the Henry Hub were lower by more than 10 cents to an index near $2.80, Waha shed more than 20 cents to an index near $2.50 and Chicago shed more than 25 cents to an index near $2.70. At the SoCal Border deals were nearly 25 cents lower to an index near $2.90, while PG&E Gate shed about 10 cents to an index near $2.85.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.