Weekly cash natural gas prices fall on mild weather, while futures pare losses at end of week

Weekly cash natural gas prices fell as scattered cold weather failed to create enough widespread demand for heating, while weather forecasts that added more heating degree days (HDD) toward the official start of winter lifted futures late in the week ending Dec. 8.

NGI’s Weekly Spot Gas National avg. for the period 11–15 December fell 42.0 cents to $2,390. Losses were spread across all regions except West Texas, where the weekly average rose 72.5 cents to $1,820.

The Nymex January futures contract settled at $2.491/MMBtu in late trading on Friday, up 9.9 cents day/day but still below $2.518 last week.

It was a major drag on natural gas bulls, who have battled light demand in what NatGasWeather said was “one of the warmest Decembers in 50 years,” with strong production compounding concerns about a supply glut.

Conditions during the week were defined by highs in the northern United States in the 30s and 50s, with little coverage of subfreezing daily highs.

NatGasWeather said: “The official start of winter has not yet arrived, but clearly anomalously warm December weather has led to risk trading.”

In addition, production held close to record highs and natural gas inventories fell by a much-expected amount below the five-year production average.

Against this background, physical gas prices in centers across the country have been losing week after week.

The main weekly declines in cash prices were in the Northeast. PNGTS down 4,045 for the week to average $3,575 and Algonquin City Gate saw a weekly drop of $3,975 to an average of $2,875. Activity combined to control Northeast Regional Avg. $2,565 per week down to $2,685.

The West Texas/SE New Mexico market was higher with new capacity helps boost prices. Permian El Paso added 76.5 cents wk/wk to average $1,815. Transwestern it gained 71.5 cents on $1,780 for the period.

Futures Recover

Meanwhile, futures struggled early in the week to December 15. Prices fell 15.0 cents on Monday, driven by natural gas production and a mild weather outlook.

“The data confirmed that production appears to be going nowhere,” analysts at Gelber & Associates said, attributing the strength to associated gas produced from oil wells in the Permian Basin.

“As long as oil market conditions allow, producers will continue to be motivated to drill and thereby add related gas supplies, even if natural gas prices remain low,” Gelber said.

The January futures contract shifted direction midweek and continued higher into the weekend, boosted by changes in weather forecasts that raised expectations of heating-driven demand.

Vortex Commodities meteorologist/trader Brian Lovern told NGI there are signs the bearish weather has approached or peaked, with a move closer to normal possible into the new year. “If that happens, I think we’re established at least for a while,” Lovern said.

Stronger demand could support more robust drawdowns after a slow start to the November 1-March 31 picking season.

The US Energy Information Administration report for the week ended Dec. 8 showed withdrawals of 55 Bcf, matching the number modeled by NGI and many others.

The withdrawal compared to a five-year average withdrawal of 81 Bcf and a year earlier withdrawal of 46 Bcf. As of 12/8, inventories were 3,664 Bcf, 260 Bcf above the five-year average of 3,404 Bcf and 245 Bcf above last year’s level of 3,419 Bcf.

Initial Reuters estimates for the week ended Dec. 15 ranged from withdrawals of 44 Bcf to 103 Bcf, with an average decline of 80 Bcf. That compares with a withdrawal of 82 Bcf during the same week last year and a five-year average decline of 107 Bcf.

NatGasWeather said the next three to four drafts could be lighter than usual. It cited warmer-than-average temperatures across most of the country and forecasts of a warmer-than-normal trend for the next two weeks.

“As such, surpluses are likely to increase to nearly 350 Bcf by the end of December, then with the potential for further increases unless cooler/bluer weather maps arrive by early January,” NatGasWeather said.

Friday cash prizes

Maxar’s forecast showed temperatures in Chicago starting to drop starting Saturday. By Monday, the Windy City’s high is forecast to reach just 49 degrees with a low of 23 degrees.

Offers on Chicago City Gate were 13.0 cents higher at $2,190 on weather-driven demand. Earnings were posted in centers across the region, which drove Midwest Regional Avg. Up 11.5 cents day/day to $2,155.

Conversely, after cooler conditions early in the weekend into Monday, the outlook pointed to highs in New York and parts of the Northeast and Mid-Atlantic in the low to mid-50s.

Cool pre-warming underwear backed by deals on Iroquois Zone 2, up 9.0 cents to an average of $2,225. The larger regional trend was lower as warming was expected to dampen demand by Monday. Algonquin City Gate prices were 22.5 cents lower at $1,860. Transco Zone 6 NY fell 13.0 cents to $1,650. Combined action acts as Northeast Regional Avg. Down 12.5 cents to $2,030.

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