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January 2018 natural gas rises in technical buying; colder weather in store

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January 2018 natural gas rises in technical buying; colder weather in store

After tumbling 15.0 cents to settle at $2.678/MMBtu in the prior session, NYMEX January 2018 natural gas futures climbed overnight ahead of the Wednesday, Dec. 13, open, in renewed buying amid sentiment of oversold conditions and bullish revisions to weather outlooks.

At 7:30 a.m. ET, January 2018 natural gas futures were trading at $2.715/MMBtu, up 3.7 cents on the day, after covering a tight overnight spread of $2.684/MMBtu and $2.728/MMBtu.

Updated National Weather Service outlooks show below-average temperatures confined to portions of the Northeast in the six- to 10-day period but encompassing the bulk of the country's northern tier in the eight- to 14-day period, while average temperatures stretching from the balance of the Northeast and most of the Mid-Atlantic into a few parts of the Midwest and a section of the Northwest in the shorter-range view shift downward to settle over a horizontal swath along the midsection of the country further out.

Above-average temperatures initially engulfing the bulk of the country should eventually shrink to be contained to the southern U.S.

The expanding scope of cold weather in forecasts spells rising natural gas demand for heating in the coming weeks, which should accelerate the pace of storage erosion following the recent reversal to an inventory build and an anticipated lackluster withdrawal in the forthcoming storage data.

In its latest inventory report, the U.S. Energy Information Administration reported an atypical 2-Bcf injection for the week ended Dec. 1 that was the first December net build since 2012. It defied both the 69-Bcf five-year average draw and a 43-Bcf pull seen in the corresponding week in 2016. Total working gas stocks were at 3,695 Bcf, or 264 Bcf below the year-ago level and 36 Bcf below the five-year average of 3,731 Bcf.

For the weekly storage data due out on Thursday that will cover the week to Dec. 8, market participants expect a reprise of withdrawals from stocks albeit at a rate still trailing historical averages. Projections call for a drawdown in the high 40s Bcf to the low 70s Bcf, which would compare to a 132-Bcf prior-year pull and the 78-Bcf five-year average draw.

In cash activity, day-ahead natural gas was moved at mixed values Dec. 12, in line with the recent volatility in futures.

Regionally, Northeast spot gas price action surged by almost 96 cents on the session to average at $4.567/MMBtu, as Gulf Coast next-day gas pricing held near unchanged day on day at an index at $2.776/MMBtu. By contrast, West Coast and Midwest cash gas prices faltered by between 4 cents and 5 cents on average to indexes at $2.603/MMBtu and $2.588/MMBtu, respectively.

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Looking at the major hubs, Transco Zone 6 NY day-ahead gas pricing logged a near $1.70 gain in deals averaging at $5.477/MMBtu, as benchmark Henry Hub spot gas price activity tacked on about 6 cents to average at $2.866/MMBtu. PG&E Gate next-day gas price action advanced by roughly 2 cents to an index at $2.992/MMBtu, as Chicago hub prices slumped by around 4 cents on average to an index at $2.744/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.