December natural gas futures profit from storage result, weather; Cash mixed

Nymex December natural gas futures settled higher on the final day of trading in the shortened Thanksgiving work week, boosted by a surprise drawdown from inventories and approaching cold weather.

At the first sight:

  • EIA Prints 7 Bcf Storage Draw
  • Warming follows a short-term cold
  • Thanksgiving is cash tight

The front-month contract settled at $2.897/MMBtu on Wednesday, down from an early session high of $2.916/MMBtu but still up 5.1 cents from Tuesday’s close. Trading on the day took place on either side of the previous day’s settlement, looking for direction from the latest inventory report.

January futures followed, settling 4.0 cents higher at $3.033.

Cash natural gas markets were mixed by region, but rose overall with weather forecast for the week ahead, countering lower demand expected over the long holiday weekend. National Organization of NGI Spot diameter of the gas rose 18.5 cents to $2,970.

Slight inventory support

The U.S. Energy Information Administration (EIA) released its weekly storage report at noon ET, a day earlier than usual due to the holiday.

The report outlined withdrawal 7 Bcf from the natural gas reservoir in the week ending November 17. This compares with a five-year average withdrawal of 53 Bcf and a year-ago withdrawal of 60 Bcf.

The move was flawed against the expected modest injection.

Before going to press, NGI modeled an injection of 4 Bcf. A Reuters poll showed a range from a withdrawal of 3 Bcf to an injection of 31 Bcf, with a median increase of 4 Bcf. A Bloomberg survey spanned estimates of a draw of 9 Bcf to 17 Bcf, creating a median of 3 Bcf. Average of The The Wall Street Journal exploration worked out to inject 2 Bcf.

Participants in online energy platform Enelyst called the 13 Bcf draw from storage in the east a “huge miss” compared to expectations during a post-press discussion. Below-average temperatures from Maine to North Carolina during an overcast week fueled the decline.

Still, with total reserves at 3,826 Bcf, “Surpluses still went from 203 Bcf to 249 Bcf, which is not exactly scary,” NatgasWeather meteorologist Rhett Milne noted during a discussion on Enelyst.

In addition, the EIA inventory report for the week ending Nov. 24 could print another single-digit build or draw that could result in a storage surplus of about 285 Bcf, according to NatGasWeather.

As for the next storage report, early estimates provided to Reuters range from a withdrawal of 35 Bcf to an injection of 8 Bcf, with a median decline of 9 Bcf. That compares with a draw of 80 Bcf a year earlier and a five-year average decline of 44 Bcf.

Demand is mixed

National heating demand will remain slightly below average through Thursday as a mild weather system leaves the east, NatGasWeather said in a midday update.

But price support could return with a colder weather system set to track northern and central parts of the country from Friday to Sunday, followed by a cooler strengthening shot the following week.

“The upcoming cooler pattern would be more impressive if not for weather maps favoring near-to-above-normal warming across much of the United States from December 3 to December 7 for a return to light national demand,” NatGasWeather reports.

The firm sees continued volatile trading ahead of the withdrawal of the December contract from the exchange on November 28.

Meanwhile, Wood Mackenzie reported lower natural gas production 48 at a near-record 104.5 Bcf/d on Wednesday, down from 104.7 Bcf/d the previous day. LNG export estimates were still at a respectable 14.3 Bcf/d.

Mixed holiday prices

Trading in the natural gas cash market Wednesday from Thursday to Monday saw flow change due to weather and lower holiday demand.

A cold weather system was expected to track across the northern and central United States, bringing rain and snow Friday through Sunday, according to NatGasWeather on Wednesday. Lows were expected to drop into the 0 to 30s. The Plains and North Texas were forecast to see lows in the 20s and 30s.

“As a result, national demand will increase to a strong level,” Milne said.

The Northeast, buoyed by stronger weather-related demand, saw substantial gains led by Tenn Zone 6 200L. Bids ranged from $4,300 to $10,000 and averaged $5,045 per day/day profit of $2,030. Earnings across Nord Est lifted the regional average to $5,105, up $2,230.

While other regions, including the Midwest and Midcontinent, saw gains in spot prices, gains were kept to a minimum by demand squeezed by school and business closings.

Chicago City Gate posted a 13.5 cent day/day increase to average $2,545 a Northern Natural Demarc added 19.0 cents to average $2,540. Texas markets mostly pointed lower on the holiday package. in west texas, Transwestern was among the biggest losers of the day, down 29.0 cents day/day to average $1,810. Meanwhile in East Texas Houston Ship Channel down 13.0 cents day/day to $2,300.

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