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January 2018 gas extends gains in technical buying, weather support

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January 2018 gas extends gains in technical buying, weather support

After a settle up 0.9 cent at $2.772/MMBtu ahead of the weekend, NYMEX January 2018 natural gas futures extended higher overnight leading up to the Monday, Dec. 11, open, in technical buying as the contract approached oversold conditions and some weather support. At 6:50 a.m. ET, the front-month January 2018 gas futures contract was trading 4.0 cents higher at $2.832/MMBtu.

January 2018 gas shed 28.9 cents in the prior week, inspiring buying at lows that is feeding upside momentum in the market.

Seasonable to colder-than-normal winter weather in store for the major heat-consuming portions of the eastern U.S. should keep natural gas demand for heating elevated despite warmer conditions elsewhere, feeding additional support for gains.

Although above-average temperatures encompass a majority of the country in both the six- to 10-day and eight- to 14-day forecasts from the National Weather Service, average to below-average temperatures linger over the Northeast, Mid-Atlantic and fringes of the east-north-central U.S. in the shorter-range view before expanding to overtake nearly the entire northeastern quadrant of the U.S. and the fringes of the Southeast further out.

Recent cold weather and the extended cold forecast for portions of the East should bolster demand for natural gas and allow for a reprise of weekly storage draws, following the atypical injection to stocks in the latest inventory data.

In its most recent storage report, the U.S. Energy Information Administration outlined a 2-Bcf injection for the week ended Dec. 1, which marked the first December net build since 2012. It defied consensus estimates, as well as the 69-Bcf five-year average draw and a 43-Bcf pull seen in the corresponding week in 2016.

Total working gas stocks currently sit at 3,695 Bcf, or 264 Bcf below the year-ago level and 36 Bcf below the five-year average of 3,731 Bcf.

The EIA's latest "Natural Gas Weekly Update" for the week ended Dec. 6, much of which will be reflected in the next storage report that will cover the week to Dec. 8, fuel the potential for a return to storage erosion, as it shows total U.S. gas consumption 8% higher week on week amid stronger consumption across major sectors, while dry production was down 1% over the same period.

At the cash hubs, price action for the revised natural gas offering moved Dec. 8 was predominantly biased lower amid pressure from the inclusion of the low-demand weekend days in the package.

Among the key delivery locations, Chicago spot gas prices led the downtrend with an 8-cent retreat on average to an index at $2.628/MMBtu. PG&E Gate next-day gas pricing followed with a near 4-cent slump in transactions averaging at $2.866/MMBtu, then benchmark Henry Hub cash gas price activity that shed about 3 cents to average at $2.781/MMBtu. Defying the wider decline, Transco Zone 6 NY hub action advanced by around 5 cents on the day to an index at $4.074/MMBtu.

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In regional terms, Midwest day-ahead gas pricing unraveled roughly 10 cents to average at $2.552/MMBtu, as West Coast cash gas price action deflated by about 14 cents to an index at $2.502/MMBtu. Gulf Coast spot gas prices faltered by around 4 cents on average to an index at $2.731/MMBtu, as Northeast next-day gas price activity logged a near 36-cent increase against the broad retreat in deals averaging at $3.593/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.