January 2017 natural gas futures reversed early profit-taking losses to extend its rally into expiration at the close of business Wednesday, Dec. 28. Stopping just shy of $4/MMBtu at an intraday high of $3.994/MMBtu, a level not seen since November 2014, the contract finished its run 16.9 cents higher on the day at $3.930/MMBtu.
Setting up to take the lead, February 2017 natural gas added 13.2 cents to settle the midweek session at $3.898/MMBtu.
Market participants are turning their attention to the next storage report from the U.S. Energy Information Administration to be released at 10:30 a.m. ET on Thursday, Dec. 29. The report will cover the cold week to Dec. 23 and is expected to show a large withdrawal likely to erase the remaining storage surplus.
Analysts and traders surveyed ahead of the release of the upcoming EIA storage report anticipate a range of withdrawals from 219 Bcf to 240 Bcf, with the consensus expectation being a storage draw of 231 Bcf, above the previous week's surprise 209-Bcf drawdown and well above the five-year average withdrawal of 80 Bcf and the 50-Bcf drawdown reported for the same week in 2015.
The drawdown will follow the reported net 209-Bcf withdrawal from natural gas inventories during the week ended Dec. 16 that brought the total working gas supply to 3,597 Bcf, or 226 Bcf below the same week in 2015 and 78 Bcf above the five-year average of 3,519 Bcf.
The injection anticipated in this week's data would result in a total working gas supply of 3,366 Bcf. The year-on-five-year-average surplus would turn to a 73-Bcf deficit, while the deficit to the year-ago level would widen to 407 Bcf.
Midrange weather forecasts provided additional upside momentum for natural gas futures, as after a brief respite from cold across the eastern third of the country in the six- to 10-day period, below-average temperatures will engulf the majority of the country in the eight- to 14-day period.
Cold weather in major heat-consuming regions should drive up heating demand and keep demand for natural gas supported, helping to push the value of natural gas futures higher.
Trades done for next-day delivery at the key hubs across the U.S. were mixed by weather.
Transco Zone 6 NY traded about 15 cents higher to an index near $3.75, and Tetco-M3 traded about 5 cents higher to an index near $3.40. Henry Hub bucked the trend, shedding about 1 cent to an index around $3.65, while Waha and Chicago each added about 1 cent to indexes atop $3.40 and $3.60, respectively. In the West, losses on either side of 1 cent took SoCal Border to an average near $3.55 and PG&E Gate to an index near $3.85.
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