Forecast weekend cold snap lifts US spot gas prices across all regions

Spot gas prices across the United States rose in Dec. 30 trading for Jan. 1-3 flows, as forecasts show a sharp temperature drop over the holiday weekend in regions that had recently seen unseasonably mild weather and tepid gas demand.

The largest drops were forecast in the Southeast, Texas, and Northeast, which will help lower the average US temperature to 38 degrees Fahrenheit Jan. 2 and 33 F Jan. 3, down from 50 F Dec. on 31.

S&P Global Platts Analytics expects gas demand to rise sharply in tandem with the lower temperatures, boosted by both res/com and gas-fired power demand. Projections show an expectation that total US demand, excluding exports, will average 103.2 Bcf/d for the next seven days, up from a month-to-date average of 92.7 Bcf/d.

Texas

The average temperature in Texas was forecast to drop into the 30s Fahrenheit Jan. 2-3, down more than 30 degrees from 63-67 F Dec. 30-31, according to S&P Global Platts Analytics and CustomWeather. The dramatic temperature shift would move the state from being 19 degrees above normal Dec. 31 to 16 degrees below normal Jan. 2.

The drop will affect both West Texas and East Texas, according to National Weather Service forecasts.

The agency forecast Houston would see a high of 48 F and a low of 33 F on Jan. 2, down from a high of 81 F and low of 72 F on Dec. 31. Preliminary settlement data shows that Houston Ship Channel was trading 38.50 cents higher at $3.595/MMBtu on Dec. 30, up 16% from a seven-day average of $3.10/MMBtu for Dec. 23-29.

Further west in the Lone Star State, the National Weather Service forecast that Midland will see lows drop into 20s F Jan. 1-2, from the high 40s F Dec. 30-31. Waha Hub was trading 38 cents higher at $3.33/MMBtu, preliminary settlement data shows.

Southeast

Turning to the Southeast, the average Southeast temperature was forecast to drop from 69 degrees F Dec. 30-Jan. 1, which is 19-20 degrees above normal for the region, down to 56 F Jan. 2 and 42 F Jan. 3.

The lower temperatures are expected to double the region's res/com demand by Jan. 3 from Dec. 30 levels and increase gas-fired power demand by 20% over the same time.

The National Weather Service forecast -Atlanta's lows would fall from nearly 60 F Jan. 1 to 30 F Jan. 2, with highs falling from 74 F on Jan. 1 to 65 F on Jan. 2.

Cash Transco, zone 4 gained 41 cents to trade at $3.715/MMBtu, while cash Henry Hub traded up 32 cents at $3.72/MMBtu.

Northeast

The colder temperatures were forecast to reach the Northeast later than other regions, with continued above-average temperatures Jan. 1-2 followed by a sharp temperature drop Jan. 3.

Cash Algonquin city-gates gained $1.745 to trade at $5.49/MMBtu in Dec. 30 trading, according to Platts preliminary settlement data. The New England gas demand benchmark was not alone in the scale of the day's price surge, with Tennessee, Zone 6, delivered gaining $1.50 to trade at $5.395/MMBtu.

The National Weather Service forecast the high temperature in Boston to fall to 29 F on Jan. 3, down from recent highs in the mid-40s and low-50s F.

Similarly, New York City's high was forecast to slide to 35 F Jan. 3, from highs near 60 F Jan. 1-2.

Outlook

The depth of the temperature drop is forecast to be short-lived in the above regions, with temperatures expected to rise Jan. 4-5.

The National Weather Service's six-to-10-day outlook showed above-average temperatures across Texas, the Southeast, and Northeast for Jan. 4-8, which could see spot gas prices in those regions falling again.

The same outlook showed a likelihood that Upper Midwest and Pacific Northwest temperatures will remain below-normal, which could prove bullish for near-term gas pricing in those regions.