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January 2018 natural gas whipsaws in truncated workweek's opening session

January 2018 natural gas whipsawed in the post-Christmas holiday session Tuesday, Dec. 26. Early gains on the back of cold weather were reversed amid skepticism surrounding the strength of weather-related demand as options on the contract expired at the close of business, and the contract is set to roll off the board at the Dec. 27 settle. While rising to a $2.780/MMBtu intraday high, the contract ended 2.4 cents lower at $2.643/MMBtu.

Traders worked early to cover positions amid outlooks for below-average temperatures to engulf the major heat consuming regions of the country over the period to January 8, according to the latest weather maps from the National Weather Service.

Below-average temperatures are forecast for the Northeast and Midwest in both the six- to 10-day and eight- to 14-day outlooks, above-average temperatures engulf the western U.S. and a band of average temperatures in the central U.S. separate the areas of extremes.

Stronger demand for heating supported by the colder weather should drive natural gas demand higher, driving down natural gas inventories in the process.

The total working gas supply tumbled 182 Bcf in the week to Dec. 15, as cold weather during the review week hiked residential and commercial sector consumption. The drawdown compared with the five-year average net withdrawal of 125 Bcf and the prior year's net withdrawals of 200 Bcf, and took working gas stocks to a total of 3,444 Bcf. Inventories are 84 Bcf less than the five-year average and 183 Bcf less than at this time in 2016.

Longer-range weather outlooks undermine the support of the midrange outlooks as the NWS and The Weather Co. each see milder conditions during the peak winter months.

Day-ahead trade was marked by volatility as cold weather drove gains at hubs across the country.

Nowhere was the advance more prevalent than in the Northeast where Algonquin Citygates stormed nearly $35.00 higher to an index of nearly $52.25.

Algonquin Gas Transmission LLC reported restricted operations due to nominations exceeding AGTs operational capacity. The pipeline operator issued a notice requesting that customers/point operators on AGT be aware of the impact that non-ratable hourly takes from the system may have in causing delivery pressures reaching lower than desired levels.

"As a reminder, AGT's system is not designed to sustain delivery pressures above contract levels while making non-ratable/accelerated deliveries above scheduled quantities for more than 6 consecutive hours, to be followed by flows below scheduled quantity for the balance of any 24 hour period," AGT said.

Also in the Northeast, Transco Zone 6 NY deals were up nearly $17.60 to an index near $21.20 and Tetco-M3 added more than $8.15 to an index near $11.60.

Elsewhere, Henry Hub deals advanced nearly 10 cents to average near $2.70, Chicago jumped more than 25 cents to an index near $2.95, Waha gained nearly 15 cents to an index near $2.55, while in the West, SoCal Border and PG&E Gate bucked the wider sharp uptrend trading nearly 35 cents and about 1 cent lower, respectively, to indexes near $2.90 and $2.85.

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.