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February gas continues uptrend leading to options expiration

After ending the prior session up 5.3 cents at $3.332/MMBtu, February gas retained an upside bias overnight ahead of the Thursday, Jan. 26, open, as short covering leading up to options expiration at the settle and lingering weather support undermined bearish expectations for the forthcoming storage data due out at midmorning. The contract traded to a $3.430/MMBtu high and was last seen 8.9 cents higher on the session at $3.421/MMBtu.

Seasonable weather conditions reflected for major heat-consuming regions in the latest outlooks suggest support for heating demand in the coming weeks.

In its latest forecasts, the National Weather Service sees average to below-average temperatures holding over the Eastern Seaboard and much of the West into a section of the west-central U.S. in the upcoming six- to 10-day period, before shifting in scope to engulf all of the country's upper tier and a majority of the West further out to the eight- to 14-day period.

Above-average temperatures encompass nearly the entire central U.S. and parts of the Southwest in the near term but settle over the southern tier of the U.S. in the longer-range projection.

Weather-related demand support should allow for working gas stocks to continue eroding, albeit at a slower pace, as the most significant cold of the season and subsequently the largest weekly storage draws are already expected to be in the rearview mirror.

Already, market participants anticipate a sharp step-down in the rate of weekly inventory pulls when the U.S. Energy Information Administration releases its next storage report at 10:30 a.m. ET on Thursday, which will cover the week ended Jan. 20.

Estimates for the forthcoming inventory data call for a draw from stocks from 111 Bcf to 135 Bcf, with consensus formed at a 121-Bcf withdrawal. This would compare with a 176-Bcf five-year-average drawdown and the 202-Bcf pull seen in the corresponding week in 2016.

The week's data would follow the 243-Bcf withdrawal reported by the EIA for the week to Jan. 13 that was the largest draw of the season thus far. That took total working gas stocks to 2,917 Bcf, or 431 Bcf below the year-ago level and 77 Bcf below the five-year average of 2,994 Bcf.

A storage drawdown at consensus would leave overall inventories at 2,796 Bcf, shrinking the deficits to the five-year average and the year-ago levels to 22 Bcf and 350 Bcf, respectively.

At the cash markets, jumbled demand expectations encouraged choppy price activity for natural gas booked Wednesday for Thursday flow.

Looking at the key delivery locations, an almost 10-cent increase steered Transco Zone 6 NY next-day gas price action to an index at $3.180/MMBtu, as a near 5-cent gain brought PG&E Gate hub pricing to an average at $3.671/MMBtu. Conversely, a 4-cent decline drove Chicago spot gas price activity to an index at $3.225/MMBtu, and an almost 3-cent retreat took benchmark Henry Hub day-ahead gas pricing to an average at $3.258/MMBtu.

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On a regional basis, Northeast cash gas price activity shed roughly 2 cents to average at $3.281/MMBtu, as West Coast and Midwest spot gas prices held flat day on day at indexes at $3.144/MMBtu and $3.164/MMBtu, respectively. Meanwhile, Gulf Coast next-day gas pricing notched a near 2-cent uptick in deals averaging at $3.157/MMBtu.

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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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.