With the arrival of winter, the weekly spot prices of natural gas and futures open for the New Year’s Bull Parade

Weekly cash natural gas prices began 2024 riding a wave of winter weather momentum, gaining significant ground alongside the futures market.

NGI’s Weekly Spot Gas National avg. for John The 2-5 trading period jumped 82.5 cents to $2,970.

Conditions were defined by cooler air in the Midwest with the start of January and the expectation of a significant weekend snowstorm in the east. Forecasters also called for a widespread freeze next week — and the week after — that could fuel strong national heating demand.

Strong gains spanned the lower 48 as the trading week closed. Avg. SoCal borders rose $1,900 to $4,525 while Northwestern Sumas increased by $2,370 to $4,330 a Algonquin City Gate near Boston, it climbed from $3,145 to $5,060.

The February Nymex contract also strengthened during the week. It settled at $2.893/MMBtu to close trading on Friday, up 7.2 cents on the day and up 15% from the end of the previous week.

“Winter is starting to show and affect prices,” said NGI’s Thomas Saal, senior vice president of energy, StoneX Financial Inc. “Now it’s just a matter of Mother Nature getting through until January.”

The forecast was indeed calling for cooler air in the coming days. National Weather Service data showed single-digit lows in the Mountain West, Plains, Midwest and Northeast during the business week ahead — and into the week after.

The resulting heating demand should help absorb the hefty natural gas stocks that were built up amid strong production and mild December weather, EBW Analytics Group analyst Eli Rubin said. Output reached record levels above 106 Bcf/d in late 2023 and held close to that mark during the past week.

“While the jump in production higher into the start of the heating season continues to cast a bearish long-term shadow,” Rubin said, “the nearer outlook through mid-winter may show signs of easing.”

He also added that “the risk of an increasing freeze through mid-January amid a spreading cold front” could limit production in the Rockies, North Dakota and parts of the Midcontinent region this month.

“While unlikely to be a market-shattering event similar to winter storms Uri or Elliott” of 2021 and 2022, “freezes and larger withdrawals from storage could push Nymex gas higher.”

Storage scenario

However, with robust production and favorable weather marking the start of winter, steep storage draws have yet to materialize.

The US Energy Information Administration (EIA) on Thursday posted a draw of 14 Bcf natural gas from underground supplies for the week ending December 29. It is well below historical norms and market expectations for a mid-30s draw to the low 40s Bcf. NGI modeled a 40 Bcf decline for this report. The five-year draw average for the period was 97 Bcf.

The decline reduced inventories to 3,476 Bcf, but inventories were still 13% above the five-year average.

RBN Energy LLC Executive Chairman Rusty Braziel warned that while many analysts expect at least a modest decline this year, natural gas production is expected to remain at historically strong levels in 2024 in anticipation of several new LNG facilities coming online. The first could open later this year, with several more to follow in the coming years.

But aside from the inevitable mid-winter spike in consumption, middle-class domestic demand is “going nowhere,” Braziel said, and the specter of a supply-demand imbalance was heading into the spring season.

But in the first week of January, traders looked past the anemic storage data and fragile fundamentals and instead focused on the expected winter wave.

Analysts also noted strength in liquefied natural gas volumes. LNG held above 14 Bcf/d last week — near current capacity — as European countries sought heating fuel as they also head into the heart of winter.

The combination of healthy export volumes and frigid weather in the near term could lead to a sharper decline in inventories in January, as well as momentum for both futures and cash prices.

“It looks like the bulls are going to be cold in the next two weeks,” Saal said. “We’ll have to see if it holds up.

The first estimates were reported by Reuters for the EIA’s storage report covering the week ending in January. 5 ranged from withdrawals of 65 Bcf to 159 Bcf, with an average drawdown of 123 Bcf. This compares to a five-year draw average of 87 Bcf.

Friday cash prizes

Spot gas prices gave up for the first time this year on Friday, led by lower losses in Texas and the Midwest, which followed solid gains earlier in the week. NGI Spot Gas National Avg. lost 18.5 cents to $3,095.

in west texas, Permian El Paso down 95.5 cents day/day to average $1,500 a Wow fell 89.5 cents to $1,445.

Kate in East Texas lost 29.0 cents to $2,260.

Chicago Citygate shed 13.0 cents to $2,445, while elsewhere in the Midwest, Central American NGPL fell 16.5 cents to $2,410.

Despite the dip ahead of the weekend — a common occurrence given less commercial demand — AccuWeather forecasts the short-term weather outlook could drive solid demand in the coming days. A major snowstorm was expected to blanket the Northeast during the first weekend of January, followed by about two weeks of arctic cold and more snow across large parts of the country.

“Just days after the storm dumped snow and snarls spread across the southern High Plains and into the Northeast, a second major terrain storm will threaten heavy snowfall across the central United States along a 1,000-mile swath from northeastern New Mexico to northern Michigan. ” in the following week, said AccuWeather’s Alex Sosnowski, chief meteorologist.

This could affect major markets from Chicago to New York City.

“Major winter storms have been rare in the last few weeks of 2023, but the new year has breathed new life into the weather, with storm after storm lining up over the Pacific,” Sosnowski said. “Each will track the rugged terrain of the western US and emerge on the plains, where they can not only draw moisture from the Gulf of Mexico, but also pull in cold air from Canada.

“Further storms are likely to follow in the central states throughout the month, bringing snow, rain and severe weather,” he added. “As Arctic air invades the Rockies and Plains, it may warm in the east.” The extreme temperature contrast could make some storms even more dynamic and disruptive.”

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