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January 2017 natural gas rallies almost 28 cents after recent sell-off

After shedding 27.7 cents in the prior four trading sessions, front-month January 2017 natural gas futures rebounded Wednesday, Dec. 21, gaining all of it and then some back in one day of bargain buying and short covering ahead of the upcoming release of the latest round of weekly storage data. Moving from $3.307/MMBtu to $3.549/MMBtu on the day, the contract settled the midweek session at $3.542/MMBtu, soaring 27.9 cents.

Traders were covering positions ahead of the Thursday release of the U.S. Energy Information Administration's weekly natural gas inventory report. Market analysts expect the data will show a storage withdrawal anywhere from 195 Bcf to 205 Bcf, with an average 200-Bcf pull projected for the week ended Dec. 16. The figure will compare to a 101-Bcf five-year average withdrawal and a smallish 33-Bcf pull during the same week in 2015.

For the week ended Dec. 9, the EIA reported a net 147-Bcf withdrawal from natural gas inventories in the Lower 48, which exceeded the five-year average withdrawal of 79 Bcf and the 46-Bcf pull reported for the same week in 2015. The 147-Bcf withdrawal also brought the total U.S. working gas supply to 3,806 Bcf, turning the year-on-year surplus to a deficit of 50 Bcf and shrinking the year-on-five-year average storage surplus to 186 Bcf.

However, the increased rate of weekly storage withdrawals could be short lived since mid-range weather forecasts reflect more moderate conditions across key heating regions that should sap heating demand and limit the amount of natural gas pulled from inventories.

According to the most recent weather outlooks from the National Weather Service, during the six- to 10-day and eight- to 14-day periods above-average temperatures are seen stretching from the East into the bulk of the central U.S. and areas of the Southwest to ultimately encompass a majority of the country. Only a small section of the Midwest and much of the West should face normal to below-average temperatures through both periods.

SNL Image

SNL Image

Amid the recent sideways action in futures, next-day natural gas prices were mixed at the major U.S. consuming hubs during the midweek session.

Tumbling as much as $2 at some locations in the Northeast on Dec. 20, day-ahead gas markets in the Northeast were varied Wednesday. Spot gas at Transco NY-Zone 6 saw an average at about $3.65/MMBtu, losing more than 25 cents. Product at Algonquin Citygates near Boston came in atop $6.55/MMBtu, slumping more than $1.50 on the day. However, at TETCO-M3 in the Mid-Atlantic, gas was priced at an average near $3.30/MMBtu, for a gain of 15 cents on the session.

At the benchmark Henry Hub market in Louisiana, day-ahead gas was assessed at almost $3.50/MMBtu, increasing more than 10 cents on the day. Next-day natural gas prices at the Chicago hub in the Midwest climbed 15 cents to an index at $3.50/MMBtu as well.

Along the West Coast, gas prices for Thursday delivery at PG&E Gate gas were up more than 10 cents to an average near $3.70/MMBtu. Next-day gas at the SoCal Border posted an index at $3.55/MMBtu, down about 2 cents.

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