After falling by 5.3 cents in the prior session, NYMEX January 2018 natural gas futures rebounded overnight ahead of the Wednesday, Dec. 20, open, amid lingering weather support.
At last glance, the NYMEX January 2018 natural gas futures contract was trading at $2.732/MMBtu, up 4.0 cents, at 6:45 a.m. ET.
The latest National Weather Service outlooks for both the six- to 10-day and eight- to 14-day periods continue to reflect below-average temperatures gripping nearly the entire country, confining the scope of average to above-average temperatures to the fringes of the Southeast and parts of the Southwest.
Cold weather in store spells stronger natural gas demand for heating, which should ramp up the amount of natural gas pulled from underground storage facilities in the weeks ahead.
Already, cold weather is seen to have bolstered demand for natural gas and driven a substantial uptick in the rate of weekly storage draws when the next inventory data is released Thursday. Preliminary estimates for the forthcoming storage report that will cover the week ended Dec. 15 call for a triple-digit withdrawal from stocks.
In the week ended Dec. 13, much of which will be reflected in the upcoming storage report, total U.S. gas consumption jumped by 27% from the prior-week level, primarily driven by 50% surge in residential/commercial-sector demand as a cold front moved across the country, according to the U.S. Energy Information Administration's most recent "Natural Gas Weekly Update."
Working gas in storage currently sits at a total of 3,626 Bcf, or 201 Bcf below the year-ago level and 27 Bcf below the five-year average of 3,653 Bcf, after the EIA reported a 69-Bcf draw for the week to Dec. 8.
Sustained rallies look to continue eluding the market, however, amid a lack of sustained cold weather thus far this winter heating season and as expected through the peak winter months.
The Weather Company's latest winter outlook suggests diverging temperature patterns that suggest volatility will persist into January 2018. Chief meteorologist Todd Crawford said the coldest air will gradually settle into the north-central states, while warmth and dryness will continue across most of the southern U.S.
Jeff Richter, principal at EnergyGPS, which partnered in the outlook, said the divided winter outlook in the Lower 48 "will not bode well for upside to the overall natural gas market in January … [which] is evident by the big push down on the winter strip through the first couple weeks of December, so widespread cold air is needed in January to keep pace with the incremental supply on the grid."
Richter noted that any warmer-than-normal conditions will keep downward pressure on the remaining portion of the winter 2018 strip by February 2018, and four of the six regions are expected to be relatively warm.
In cash trade, supportive demand outlooks encouraged the upside to prevail in price activity for natural gas booked for Wednesday flow.
Among the key delivery locations, Transco Zone 6 NY day-ahead gas pricing led the uptrend with a roughly 30-cent increase in deals averaging at $3.153/MMBtu. Chicago and benchmark Henry Hub cash gas prices followed with almost 5-cent gains on average at indexes at $2.716/MMBtu and $2.751/MMBtu, respectively, then PG&E Gate hub action that advanced by about 3 cents to an index at $2.944/MMBtu.
On a regional basis, Northeast spot gas price activity added 48 cents on the session to average at $3.587/MMBtu, while Midwest next-day gas pricing was bolstered by nearly 2 cents to an index at $2.578/MMBtu. Gulf Coast day-ahead gas prices climbed by about 3 cents on average to an index at $2.687/MMBtu, as West Coast cash gas price action logged a roughly 4-cent uptick in trades averaging at $2.647/MMBtu.
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