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January 2018 natural gas surges as lingering cold drives demand

January 2018 natural gas traded solidly higher as the week began Monday, Dec. 18, supported by rising demand as cold weather lingers across major portions of the country. The contract settled at $2.745/MMBtu, 13.3 cents higher on the session.

Sharp gains were driven as the market anticipates demand to remain strong following a 27% increase in total consumption in the week to Dec. 13 that was driven by a 50% week-on-week gain in residential and commercial consumption, an 18% gain in consumption in the power-generating sector and an 8% week-on-week increase in industrial consumption, according to the latest Natural Gas Weekly Update.

On the heels of the cold front that drove the recent jump in consumption, the National Weather Service's six- to 10-day forecast shows below-average temperatures spanning the majority of the west and central U.S., areas of normal temperatures spanning portions of the Southwest and East, and above-average temperatures spreading across a portion of the Southeast.

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The eight- to 14-day projection shows below-average temperatures shifting to include the Northwest, the majority of the central U.S., and portions of the Northeast, the mid-Atlantic, Gulf and the Southeast. Portions of the Southeast and Southwest will see average temperatures, leaving small portions of the two regions under above-average conditions.

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Greater amounts of natural gas are expected to be pulled from underground storage as demand rises, shrinking the total working gas supply and widening the deficits to the year-ago and five-year average levels.

Following an uncharacteristic injection into natural gas inventories in the week to Dec. 1, the U.S. Energy Information Administration reported that 69 Bcf was withdrawn from the working gas inventory in the week to Dec. 8. The pull was above market expectations but below the 78-Bcf five-year-average withdrawal and the 132-Bcf net withdrawal reported during the corresponding week in 2016.

Working gas stocks total 3,626 Bcf, which is 27 Bcf less than the five-year average and 201 Bcf less than 2016 at this time.

Natural gas traded in the day-ahead markets at mostly higher prices. Northeast markets posted sharp losses against the wider uptrend, correcting from prior runs to the upside amid strong demand.

Transco Zone 6 NY deals tumbled nearly 35 cents to an index near $2.85, and Tetco-M3 traded down more than 20 cents to an index near $2.40. Conversely, Henry Hub trades were up nearly 10 cents to an index atop $2.70, Waha advanced about 15 cents to an index near $2.50, and Chicago gained more than 10 cents to an index atop $2.65. SoCal Border trades were nearly 20 cents higher to an index near $3.00, and PG&E Gate gained nearly 20 cents to about $2.55.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.