Natural gas forwards pulled back during the Jan. 11-17 trading period as impacts to both supply and demand from recent Arctic weather began to subside and as a much milder late January pattern came into sharper focus.
After surging in the week-earlier period, fixed prices from coast-to-coast fell back down, NGI’s Forward Look data show.
Despite production freeze-offs and robust heating demand amid the most impressive spell of winter weather for the Lower 48 season-to-date, forecasts teased a downright balmy late January period that ultimately deflated prices.
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Absent a frigid enough encore to the recent bout of winter, Henry Hub February prices sank 16.4 cents week/week, falling back below the $3/MMBtu mark to $2.891.
Late January Warmth
Forecast maps from Maxar’s Weather Desk as of Thursday painted the Lower 48 with the red, orange and yellow hues of unseasonably warm temperatures starting early next week and lasting into the start of February.
“The near term chill quickly gives way to a warmer pattern in the six- to 10-day period, as Pacific flow is enhanced downstream over the Gulf of Alaska amid a lack of Arctic blocking,” the forecaster said. “Above normal temperatures are widespread in coverage as a result, including much and strong aboves for most of the period in the Midwest and during the second half in the East. At the mid-period peaks, lows are in the 30s and highs in the 40s in Chicago, while New York City has lows in the low 40s and highs in the low 50s.”
The 11- to 15-day period was expected to carry over the widespread above normal temperatures seen for days six through 10, according to Maxar.
The warmest conditions were expected early in the period, “with much and strong aboves from the Midwest to the East Coast,” the forecaster said. “Temperatures moderate in these areas during the second half, particularly along the East Coast where readings return to normal as a trough settles into eastern Canada.”
Regional hubs that had rallied a week earlier ahead of the encroaching Arctic cold posted steeper discounts compared to the national benchmark.
In the Midwest, Chicago Citygate basis for February fell to plus-89.5 cents, down 26.0 cents week/week. In the Midcontinent, Northern Natural Demarc tumbled 53.9 cents to end at plus-$1.250 for February.
Mid-Atlantic and Northeast prices also came down sharply during the period to narrow regional premiums to Henry Hub.
Algonquin Citygate February basis finished at plus-$6.019, a 96.7-cent swing lower. Cove Point February basis dropped to plus-$3.773, a discount of 63.5 cents for the period, Forward Look data show.
Still, Forward Look data as of Thursday showed notable month-to-date fixed price gains across the strip for much of the Lower 48, suggesting the colder start to 2024 has produced a bullish shift in market sentiment following the mild finish to 2023.
Chicago Citygate February fixed prices, for example, were trading at $2.720 in early January and had rallied more than 38% month-to-date as of Thursday, even after accounting for the discounts of the past week, Forward Look data show.
Further, a number of hubs have popped for winter 2024/25 contracts thus far in the new year, including Algonquin Citygate, where January 2025 fixed prices were up 84.8 cents (7%) month-to-date. Cove Point January 2025 prices were up 66.1 cents versus levels at the start of the month, a 12% increase, according to Forward Look data.
Weather-Driven Gains Short-Lived
Much like snow after the thaw sets in, the impact on Nymex futures from the recent January cold had largely evaporated by Thursday; the February Nymex contract was trading in line with pre-winter storm levels, settling at $2.697, down 17.3 cents on the day.
Ultimately, even with recent freeze-offs, the Arctic cold seemingly failed to rewrite the fundamental narrative dominating natural gas earlier this winter, a story centered around oversupply concerns following a fall production surge.
A triple-digit withdrawal in the latest U.S. Energy Information Administration (EIA) storage report Thursday showed cold making a dent in the year-on-five-year inventory buffer during the week ended Jan. 12. Even so, stockpiles remained at a 320 Bcf surplus to the five-year average.
At 3,182 Bcf, Lower 48 inventories exited the week above the five-year maximum of 3,089 Bcf, EIA data show.
The subsequent EIA report “is expected to bring heavy withdrawals given the cold temperatures felt this week,” Gelber & Associates analysts said Thursday. Recent forecasts “show that the remaining winter is unlikely to see temperatures any colder than those brought by this most recent cold shot.”
Daily production remained well off the recent 30-day average at 97.9 Bcf/d as of Thursday in Wood Mackenzie’s dataset, suggesting ongoing weather-related disruptions.
EBW Analytics Group estimated that freeze-offs impacted as much as 12 Bcf/d during the Arctic blast.
The duration of weather-related production declines remained a key factor to monitor for natural gas markets moving forward, EBW analyst Eli Rubin said in a recent note.
“Perhaps the most pressing near-term question for the natural gas outlook is the pace of the supply recovery…Supply had already begun to dip 2.0 Bcf/d ahead of the brunt of cold, while the strong early-winter supply surge had already appeared poised to reverse lower into mid-winter,” Rubin said. “Our current assessment has production exiting March 0.75 Bcf/d below December levels. If supply fails to fully recover from winter freeze-offs, the fundamental outlook may appear less bearish than our current most-likely market assessment.”
Arctic cold could return in February, and production impacts could endure, developments that would “help rebalance the market” moving forward, according to the analyst.
Still, “long-term fundamentals remain considerably oversupplied to bias natural gas market risks distinctly lower,” Rubin said.
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