Weekly spot natural gas futures make strong gains amid freezing cold

Weekly cash natural gas prices made a strong second run early in the new year amid frigid temperatures in most of the lower 48 and lower production data.

NGI’s Weekly Spot Gas National avg. for John The 8-12 period moved $3,095 to $6,065.

The lower 48 was littered with big winners. Smart in the Northwest advanced $3,775 to $8,315, while Cheyenne Hub in the Rockies jumped from $4,940 to $7,310 and Lebanon in the Midwest, it climbed from $3,660 to $6,070.

February Nymex contract too collected the second weeksupported by the strength of the spot market and favorable weather. It settled at $3.313/MMBtu on Friday, up 21.6 cents on the day and up 15% from the previous week.

Data from the National Weather Service (NWS) showed several wintry blasts over the past trading week that hit the Mountain West, Plains, Midwest and East. Parts of the South, including North Texas, also experienced freezing conditions, driving demand for heating.

Forecasts pointed to the potential for even stronger demand in mid-January. Another flurry of arctic air was expected to descend from Canada over the weekend and spread across the lower 48 as the upcoming trading week unfolds.

Thomas Saal, senior vice president of energy, Thomas Saal of StoneX Financial Inc., told NGI. For one thing, it could run furnaces at the highest levels of the winter so far, and for another, it could slow natural gas production in northern markets — from the Rockies to the Northeast.

“My view is that the cash market could absorb a lot of this demand, but it could have ripple effects on the futures market as well, especially if supply is lower for a period of time,” Saal said.

Production fell 3 Bcf/d to around 103 Bcf/d over the past week at its lowest point, according to Wood Mackenzie estimates. Production closed 2023 and started the new year at record levels above 106 Bcf/d. Deliveries in warehouses started in 2024 roughly 13% above the five-year average.

According to EBW Analytics Group, further declines along with the lingering cold may be needed to sustain any rallies.

“Near-term disruption to the natural gas market continues to be a focus of interest in the middle of winter,” said Eli Rubin, senior analyst at EBW. “However, once short-term weather impacts subside, a less favorable fundamental outlook points to lower natural gas prices.”

Shrink storage?

Futures advanced on Thursday – and again on Friday – following a bullish government inventory print and forecasts of further developments. This helped consolidate gains for the week.

The US Energy Information Administration (EIA) on Thursday released a selection of 140 Bcf natural gas from storage for the week ending January 5. The result beat analysts’ expectations for a draw of around 120 Bcf and far outpaced the five-year average decline of 89 Bcf.

It reflected the onset of cold weather in early January. With wintry conditions extending into the second week of January and forecast to intensify in the third week, analysts are looking for two more triple-digit inventory increases that could push underground stocks closer to average levels and further align supply/demand after a mild December.

Decline for January. 5-week cut inventories to 3,336 Bcf, although inventories were still above year-ago levels of 2,900 Bcf and the five-year average of 2,988 Bcf.

By region, the Midwest and East led with a tie of 44 Bcf and 42 Bcf, respectively, according to the EIA. South Central followed closely behind with a tie at 41 Bcf. Mountain region stocks fell by 8 Bcf, while Pacific stocks fell by 5 Bcf.

As for the EIA’s next inventory assessment, preliminary estimates reported to Reuters for the week ending in January. 12 ranged from withdrawals of 116 Bcf to 161 Bcf, with an average decline of 123 Bcf. The estimates compared to a five-year average decline of 126 Bcf and a year-over-year decline of 68 Bcf.

Steve Blair, a veteran gas broker and independent analyst, told NGI that another sharp move could follow, given the lingering cold and recent hits in production. But the bull trend may not last, he warned.

In fact, in late January, NWS data showed milder weather shaping up. Seasonally normal temperatures were forecast to expand rapidly in the final week of this month, potentially mirroring the conditions that dominated the start of winter in December. Natural gas prices fell in late 2023 in response.

Friday Cash Rally

Friday cash prices for delivery over the long holiday weekend rose as freezing weather moved across the country. NGI Spot Gas National Avg. swelled from $13,450 to $16,770.

NatGasWeather said bitterly cold air will descend from Canada and move across the Northwest, Rockies and Plains over the weekend and into early next week. It could bring freezing rain, heavy snow, gusty winds and sub-zero temperatures in northern areas.

Temperatures were expected to be mild to the south and east of the Arctic blast, the firm said, before cooling significantly on Monday as the weather moved through. Such conditions were forecast to last for a full week before warming back to average around January. 22.

Against this backdrop, spot prices posted their strongest winter gains in the lower 48, with gains of $10 or more common.

Avg. SoCal bordersfirst, it surged by $10,700 day/day to average $15,980 for gas delivered Saturday through Tuesday.

in Texas Tolar Hub rose $18,955 to $21,705, while Chicago City Gate rose from $22,820 to $25,815.

in New England, PNGTS climbed from $12,380 to $16,635. Tenn Zone 1 100L in the Southeast, it fetched $10,670 to $13,520.

As the north gets the worst of the weather, AccuWeather Chief Meteorologist Bill Deger said Friday that “an expression of bitterly cold Arctic air will move south along the Plains and into the South early next week” and will “threaten lives, property and power grids due to an extended period of heat below freezing… It may end up being the most widespread and coldest air mass the earth can sustain all winter.”

“A piece of the same storm that hits the South may also hit the Mid-Atlantic and Northeast, marking a continuation of the stormy pattern that has plagued the region for several weeks,” Deger added. “The difference with this storm will be the cold air in place, which should result in more snow in larger cities after several bursts of heavy rain.”

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