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Natural gas prices surge on cold weather; book-squaring in thin trade


According to Market Intelligence, December 2022


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Natural gas prices surge on cold weather; book-squaring in thin trade

The natural gas market advanced on the potential that longer-range forecasts are beginning to show a return of cold temperatures, while a pre-Christmas trading session resulted in thin market conditions.

January 2017 natural gas futures started Dec. 23 with a session low of $3.534/MMBtu and moved higher throughout the morning before eventually peaking at $3.715/MMBtu. The market held near the highs throughout the afternoon and ended with a gain of 12.4 cents to settle at $3.662/MMBtu.

"The natural gas market is pushing higher in Friday trade to levels not seen since Dec. 9, supported by a somewhat colder 11-15 day temperature forecast," Citi Futures analyst Tim Evans said. "Book-squaring ahead of the holiday weekend, options expiration on Tuesday, and the January futures expiration on Wednesday are additional features in today's trade."

After the natural gas market fell throughout most of the previous week on the prospect that temperatures were expected to warm significantly, the market surged Dec. 21 and Dec. 23 as colder temperatures were brought back into forecasts.

The latest six- to 10-day forecasts from the National Oceanic and Atmospheric Administration showed that only the southern third of the country is expected to be above normal between Dec. 29 and Jan. 2, 2017. Most of the Pacific Northwest, the northern Great Plains and most of the Great Lakes states should see below normal temperatures while the remainder of the country is expected to be near normal.

SNL Image

The eight- to 14-day outlook showed the cold mass in the Northwestern portion of the country descending south toward Southern California and northern Texas. Only parts of the southern Mountain and South Atlantic regions are above normal in the outlook.

SNL Image

Despite the strong tone in futures prices, cash markets were mixed as spot trades were being done for a four-day period.

Algon Gates lost nearly $3.50 to trade near $5.05 as some of the cold weather premium evaporated. Transco Zone 6 NY dropped close to 10 cents as the hub was quoted near $3.25.

In the Midwest, Chicago was about a penny better and traded between $3.50 and $3.55. Prices at Henry Hub on the Gulf Coast gained a couple cents and were pegged just below $3.60.

On the West Coast, SoCal Border gained nearly 10 cents to trade above $3.55, while Malin advanced between 5 and 10 cents to trade just above the $3.50 level.

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 SNL power and natural gas index prices, as well as forwards and futures, visit SNL Energy's Commodities Pages.