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January 2018 gas flounders ahead of storage data release

Following a 3.7-cent gain to settle at $2.715/MMBtu in the prior session, NYMEX January 2018 natural gas futures notched modest losses overnight ahead of the Thursday, Dec. 14, open, as supportive weather outlooks could not offset anticipation of a lackluster pull from stocks when the next storage data is released at midmorning.

At 6:55 a.m. ET, NYMEX January 2018 natural gas futures were trading at $2.672/MMBtu, down 4.9 cents overnight, after ranging between $2.652/MMBtu and $2.717/MMBtu.

Warmer weather that drove down heating demand is expected to have encouraged an inventory drawdown below historical averages when the U.S. Energy Information Administration releases its next weekly storage report at 10:30 a.m. ET on Thursday, for the week ended Dec. 8.

Estimates for the forthcoming inventory data call for a withdrawal in the high 40s Bcf to the upper 60s Bcf, with consensus formed at a 60-Bcf draw. This would compare to a 132-Bcf prior-year pull and the 78-Bcf five-year average drawdown.

Heating degree days during the week to Dec. 9 were 15.5% fewer than a year ago and 5.1% fewer than normal, according to degree day data from the National Oceanic and Atmospheric Administration.

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, after the EIA reported an atypical 2-Bcf injection for the week ended Dec. 1.

Keeping a floor beneath values amid downside momentum driven by bearish storage expectations, however, are bullish revisions to weather forecasts that show colder conditions expanding to encompass a majority of the country into late December.

Updated National Weather Service projections show below-average temperatures confined to the Northeast, edges of the Mid-Atlantic, upper fringes of the Midwest and the upper half of the Northwest in the six- to 10-day period, before spilling onto almost the entire central U.S. and most of the West to ultimately envelop the bulk of the country in the eight- to 14-day period.

Average temperatures settle over much of the Mid-Atlantic, the midsection of the Midwest and the lower tier of the Northwest in the shorter-range view, but shift in scope to encompass a narrow swath stretching from portions of the Mid-Atlantic into the Southeast, Gulf Coast and Southwest further out. Above-average temperatures linger over the entire southern U.S. and a few areas of the Midwest in the near term but shrink in scope to be contained to parts of the Southeast and Southwest in the extended period.

The arrival of colder weather over a majority of the country should ramp up natural gas demand for heating in the weeks ahead, which should accelerate the pace of storage erosion going forward.

At the cash markets, declining demand forecasts encouraged losses to prevail in price activity for natural gas moved for Thursday flow.

Among the key delivery locations, Transco Zone 6 NY spot gas prices led the charge lower with a near 95-cent drop on average to an index at $4.530/MMBtu. Benchmark Henry Hub next-day gas pricing followed with an almost 19-cent reduction in deals averaging at $2.680/MMBtu, then Chicago hub action that unraveled about 13 cents to average at $2.618/MMBtu and PG&E Gate cash gas price activity that fell about 8 cents to an index at $2.908/MMBtu.

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On a regional basis, Northeast day-ahead gas price action deflated by roughly 34 cents in trades averaging at $4.223/MMBtu, as Gulf Coast spot gas pricing shed nearly 16 cents to average at $2.617/MMBtu. Midwest cash gas price activity retreated by approximately 10 cents to an index at $2.493/MMBtu, as West Coast next-day gas prices crumbled by about 12 cents on average to an index at $2.480/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.