After ending its first day in the lead role down 12.6 cents at $3.232/MMBtu on Monday, March natural gas futures extended lower overnight ahead of the Tuesday, Jan. 31, open, amid ongoing fundamental pressure, as moderating weather implied by forecasts and the calendar looks to sap demand and further slow the pace of storage erosion. Sinking to a $3.142/MMBtu low, the contract was last seen 8.3 cents lower on the session at $3.149/MMBtu.
The latest National Weather Service outlook maps show above-average temperatures engulfing the bulk of the country through both the six- to 10-day and eight- to 14-day periods, limiting the scope of average to below-average temperatures to the Northeast, the upper tier of the Mid-Atlantic, the northern portion of the Midwest and a small patch of the Northwest in the shorter-range forecast and to just the Northeast, the Mid-Atlantic and the east-north-central U.S. in the longer-range projection.
Seasonable weather in store for key heating regions that is expected to generate higher low temperatures given the time of year and milder conditions reflected elsewhere in forecasts spell diminished natural gas demand for heating, which should limit drawdowns from working gas stocks in the coming weeks.
Already, the rate of weekly storage draws took a sharp step back with a 119-Bcf withdrawal outlined by the U.S. Energy Information Administration in its latest inventory report for the week to Jan. 20, which came on the heels of a 243-Bcf pull for the week to Jan. 13.
The latest reported inventory drawdown was below the average anticipated 121-Bcf draw, as well as both the 176-Bcf five-year-average drawdown and the 202-Bcf pull seen in the corresponding week in 2016. It took total working gas stocks to 2,798 Bcf, or 348 Bcf below the year-ago level and 20 Bcf below the five-year average of 2,818 Bcf.
The EIA's latest "Natural Gas Weekly Update" for the week to Jan. 25, much of which will be reflected in the upcoming storage report, feeds the possibility for a further decline in the pace of inventory erosion in the subsequent storage data, as it shows total U.S. gas consumption down 8% week over week.
Diminished demand and a reduced rate of storage decline should allow for overall inventories to remain adequate leading into the next injection period.
In cash trading, the price of natural gas booked Monday for Tuesday flow was tethered to the downside in much of the country, as weather-related demand decline conspired with retreating futures.
Across the key delivery locations, the charge lower was led by Transco Zone 6 NY day-ahead gas price action that crumbled by almost 31 cents on the session to average at $3.328/MMBtu. Benchmark Henry Hub cash gas pricing followed with a 9-cent slump in deals averaging at $3.215/MMBtu, then PG&E Gate hub activity that fell by roughly 7 cents to an index at $3.547/MMBtu and Chicago spot gas prices that recoiled by about 6 cents on average to an index at $3.134/MMBtu.
On a regional basis, Northeast cash gas price activity deflated by nearly 12 cents in transactions averaging at $3.590/MMBtu, as Gulf Coast next-day gas pricing faltered by about 8 cents to an index at $3.091/MMBtu. West Coast spot gas prices slid by almost 11 cents on average to an index at $2.918/MMBtu, as Midwest day-ahead gas price action unraveled about 12 cents to average at $3.043/MMBtu.
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