Colder weather pushes Henry Hub spot gas over $6/MMBtu as heating demand surges

US spot gas prices surged across the board in Nov. 14 trading as wintry weather lifted domestic heating demand to its highest since last March, signaling a fast-approaching end to the storage injection season.

After a three-day pause in trading, cash prices at the Henry Hub gained nearly $1.60/MMBtu, climbing to around $6.20/MMBtu for the first time since mid-October, data from the Intercontinental Exchange showed.

At other key downstream locations across the Southeast, hub prices made similar gains with Transco Zone 3, Transco Zone 4 and Florida Gas Zone 3 rising to around $6.40/MMBtu. In the East Texas gas market, prices advanced from under $4/MMBtu at prior settlement to trade in the low to mid-$5s/MMBtu.

The largest spot market gains, though, came in the Northeast where Boston-area Algonquin city-gates piled on more than $2.50/MMBtu to trade around $6.75/MMBtu at mid-session. Comparable spot-market gains at Transco Zone 6 New York pushed its daily cash price to around $6.40/MMBtu.

While the Midwest is likely to take the brunt of the coldest weather this week, with temperatures already hovering in the 20s-30s degrees Fahrenheit on Nov. 14, gas prices there made smaller gains, rising anywhere from 80 cents to $1.30 with Chicago metro-area hub prices trading around $6.25-$6.30/MMBtu and the Mich Con city-gates at close to $5.60/MMBtu.

Heating demand, weather

On Nov. 14, US gas-fired heating demand edged up to its highest since last March, hitting an estimated 40.2 Bcf/d. By later this week, residential-commercial demand is forecast to approach 44 Bcf/d, strengthening further to about 46.5 Bcf/d before the coming weekend, data from S&P Global Commodity Insights showed.

This week's surge in res-comm demand, which is expected to remain above the prior five-year average over the next seven days, comes following a slow start to the US heating season. In late October and early November, relatively mild temperatures kept domestic gas demand in check, leaving more supply available for injection to storage -- a trend that has prolonged the injection season past its typical end.

Beyond the current week, colder-than-normal weather is expected to stick around for about 90% of the Lower 48 states, according to the National Weather Service's most recent pair of near-term outlooks. From Nov. 20-24, states extending from the Upper Midwest to the Appalachians and as far north as New England are almost certain to see below-average temperatures. A lower probability for colder weather extends into the Deep South and as far west as the Rockies. By Nov. 22-28, the coldest air mass is forecast to pull back from the Lower 48 states, leaving a much lower likelihood for colder weather along the US Atlantic Seaboard and an elevated chance for mild weather further west.

Storage

After a disappointing start to the US heating season, the arrival of wintry weather this week now promises to bring a swift end to the outsized storage rebuild seen this fall -- potentially leaving stocks below the prior five-year average. For the week ended Nov. 11, the S&P Global storage model is projecting a final weekly injection of 52 Bcf, boosting US inventories to 3.632 Tcf, or about 19 Bcf below the five-year average.

In the two-weeks following, a preliminary estimate generated by the S&P Global supply-demand model shows successive drawdowns of 61 Bcf each in the respective reporting weeks ending Nov. 18 and Nov. 25. If accurate, the large initial withdrawals would widen the deficit to 59 Bcf by late November, putting the gas market on its back foot just as the heating season enters full swing.