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January 2018 gas futures advance on colder weather forecasts

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January 2018 gas futures advance on colder weather forecasts

After ending the prior session down 15.4 cents at $3.025/MMBtu, NYMEX January 2018 natural gas futures were higher overnight ahead of the Friday, Dec. 1, open, as the market advanced amid colder weather outlooks.

At last look at 7:15 a.m. ET, the January 2018 gas contract was trading near $3.098/MMBtu, up 7.3 cents on short covering ahead of the weekend inspired by more supportive forecasts.

National Weather Service projections continue to reflect below-average temperatures over small areas in the West and the bulk of the country's eastern two-thirds through both the upcoming six- to 10-day and eight- to 14-day periods. Above-average temperatures forecast for Maine and much of the West in the shorter-range view shift in scope to encompass nearly the entire West and the fringes of the Midwest further out, as average temperatures settle over the balance of the country.

Colder weather on tap for the major heat-consuming regions in the central and eastern U.S. should ramp up natural gas demand for heating, which should accelerate the pace of storage erosion going forward.

The natural gas market crumbled Nov. 30 on profit taking and selling, as natural gas inventories continued to draw lower but at a lackluster rate during the week ended Nov. 24, for which the U.S. Energy Information Administration outlined a net 33-Bcf withdrawal that 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.

Milder weather that drove down demand for natural gas is seen to have allowed for the reported pull from stocks that was a downside miss against the average anticipated 38-Bcf drawdown and below both the 43-Bcf year-ago draw and the 47-Bcf five-year average withdrawal.

Ongoing demand weakness into the close of November could encourage an additional modest storage draw when the next inventory data that will cover the current week to Dec. 1 is released, before colder weather allows for a step up in rate of weekly pulls from stocks.

The EIA'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, from 71.2 Bcf/d to 67.0 Bcf/d, amid reduced consumption across most sectors. Overall U.S. gas supply was up 1% over the same period at 81.9 Bcf/d, on the back of increased production.

In cash action, the price of natural gas for day-ahead flow was predominantly tethered to the downside Nov. 30, in tandem with futures.

Among the key hubs, Chicago next-day gas pricing led the charge lower with a roughly 21-cent decline in deals averaging at $2.778/MMBtu. PG&E Gate spot gas price activity followed with an approximately 13-cent retreat to an index at $3.048/MMBtu, then Transco Zone 6 NY and benchmark Henry Hub cash gas prices that faltered by over 9 cents on average to indexes at $2.943/MMBtu and $2.963/MMBtu, respectively.

Regionally, Midwest day-ahead gas price action unraveled about 17 cents on the session to average at $2.656/MMBtu, as West Coast cash gas pricing deflated by almost 10 cents in transactions averaging at $2.582/MMBtu. Northeast next-day gas prices tumbled by near 34 cents on average to an index at $2.822/MMBtu, as Gulf Coast spot gas price activity slumped by roughly 14 cents to an index at $2.838/MMBtu.

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.