Weekly cash natural gas prices edge higher as stock miss sends futures higher

Weekly cash natural gas prices were mixed at locations across the country as the week shortened by the Christmas holiday dampened demand while cooler weather provided a boost. Futures, meanwhile, staged a recovery on a bullish storage report and then whiffed into the New Year’s holiday weekend.

NGI’s Weekly Spot Gas National avg. for the trading period 26-28 December delivery fell 19.0 cents to $2.145.

Nymex February natural gas rallied on its first day as a front-month contract on Thursday, before closing up 4.3 cents day-to-day on Friday at $2.514/MMBtu, but above the $2.490 level of the previous week.

With temperatures dropping in parts of the country in an early winter blast, cash natural gas prices rose in some key locations during the shortened work week.

The biggest gains were in West Texas, where Permian El Paso added 58.5 cents wk/wk to average $1,735 a Wow jumped 51.0 cents to average $1,635.

However, demand was dampened by generally mild weather across much of the country. At the same time, the inclusion of the weekend in the trading package from Friday, December 29 to Sunday, December 31 reduced physical gas prices at key delivery points in several regions.

The most significant week-on-week decline was in the Northeast. Algonquin City Gate moved $1.550 lower on the index to $1.915. Smaller week/week loss of 43.0 cents at Transco zone 6 outside NY sent the average to $1,700.

The future is counting on the cold

Nymex futures trading volume was light in the week wedged between the Christmas and New Year holidays, particularly for January futures ahead of contract expiration.

The January contract slid into Tuesday’s opening session of the week, rising 6.9 cents to $2.619/MMBtu on Wednesday.

In more active trade, the February contract edged higher on Wednesday, adding to first-day gains as Thursday’s front-month contract before turning negative in the final trading session of the week and year.

Bearishly warm weather forecasts, strong production and expectations for storage output well below historical averages kept pressure on natural gas futures earlier in the week.

On Thursday, the U.S. weather model softened, mainly due to what was expected to be the coldest shot of the upcoming series for January. 5-7, NatGasWeather said.

Still, February futures moved higher, with hopes of wintry weather lingering in US and European weather models’ outlook for cooler conditions in January. 11-12, according to NatGasWeather.

The contract got another boost Thursday after the U.S. Energy Information Administration (EIA) reported withdrawals of 87 Bcf from the lower 48 natural gas deals in the week to Dec. 22, which was above most industry estimates.

NGI modeled a withdrawal of 76 Bcf before press. A Reuters poll forecast a median withdrawal of 79 Bcf. HAS The Wall Street Journal exploration ranged from selections of 72 Bcf to 82 Bcf, averaging 78 Bcf.

But the withdrawals were well below the previous year’s hefty draw of 195 Bcf — when winter storms led to freezes amid a huge surge in demand — and the five-year withdrawal average of 123 Bcf per week.

Total working gas supply was 3,490 Bcf, still a healthy 348 Bcf above the year-ago level and 316 Bcf above the five-year average.

Surpluses could climb above 350 Bcf next week on the outlook for further relatively small withdrawals from storage amid lower-than-usual demand, NatGasWeather said.

Price Futures Group senior analyst Phil Flynn said Friday that it’s “the best of times and the worst of times” for natural gas.

Flynn said: “We saw a very bullish report yesterday which helped push prices up. However, we will still need record cold to keep the rally going.”

Friday cash movements

Prices were mostly higher in locations across the country as cooler weather fueled expectations of stronger demand for heating in the early days of the new year.

With the coldest weather expected in the Northeast, natural gas delivery prices on Monday and Tuesday at Algonquin City Gate rose $1,085 to $3,150, while Transco zone 6 outside NY jumped 31.0 cents to $2,090.

On the opposite coast, prices were higher in locations across California. SoCal frontier added 25.0 cents to an average of $2,730, SoCal City Gate gained 20.0 cents at $2,950 and averaged $3,530, PG&E Citygate up 7.0 cents day/day.

Against a broader uptrend, milder weather and Monday’s holiday eased prices in West Texas locations. Wow fell 6.5 cents to $1.355 a Permian El Paso fell 12.5 cents to average $1,375.

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