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January 2018 gas futures seesaw ahead of contract expiration

Following a 2.4-cent slump in the prior session to settle at $2.643/MMBtu, NYMEX January 2018 natural gas futures attempted to extend the downside but reversed higher ahead of the Wednesday, Dec. 27, open and the contract's expiration at the close of business, as traders considered weather-related demand support implied by outlooks. At 6:52 a.m. ET, the contract was 3.6 cents higher at the overnight high of $2.679/MMBtu while trading as low as $2.598/MMBtu.

The market is wrestling with the latest temperature forecasts that show colder weather shrinking in scope, implying diminishing support for heating-related demand.

Providing upside support, the National Weather Service, or NWS, forecast for the six- to 10-day period shows the country split between below-average temperatures over nearly the entire eastern two-thirds of the U.S. and above-average temperatures over much of the West, separated by a narrow swath of average temperatures stretching over a few areas of the Rockies into fringes of Texas.

Further out to the eight- to 14-day period, temperatures over a large area of the central U.S. and the edges of the Southeast moderate to average readings, shrinking the scope of below-average temperatures to the eastern third of the U.S. and parts of the Gulf Coast. Above-average temperatures overtake almost all of the West and patches of the Midwest and Gulf Coast.

Although lingering cold over the East should keep demand for heating bolstered, moderating weather over portions of the major heat-consuming Midwest region should keep a lid on any uptick in heating-related demand.

Longer-range outlooks from the NWS and The Weather Company suggest further reduction in heating demand, as each see milder conditions during the peak winter months.

Subdued heating demand should weigh down on natural gas consumption levels, likely limiting the amount of natural gas drawn from underground storage facilities and encouraging a return to smaller inventory withdrawals leading up to and during the typical peak winter consumption period.

Natural gas inventories just notched their first triple-digit withdrawal of 182 Bcf during the week ended Dec. 15 that bested the full range of estimates coming into the day and the 125-Bcf five-year average pull, even as it trailed the 200-Bcf prior-year draw. The week's data was attributed to colder weather that ramped up demand for natural gas, especially across the power and residential/commercial sectors.

Total working gas stocks currently sit at 3,444 Bcf, or 183 Bcf below the year-ago level and 84 Bcf below the five-year average of 3,528 Bcf.

In cash activity, the natural gas offering booked for Wednesday flow tacked on value in much of the country, as cold weather looked to drive up demand.

Among the key hubs, Transco Zone 6 NY day-ahead gas prices led the charge higher with an $8.75 surge on average to an index at $12.037/MMBtu. Chicago spot gas pricing followed distantly with an almost 26-cent increase in trades averaging at $2.929/MMBtu, then benchmark Henry Hub cash gas price action that added roughly 5 cents to average at $2.683/MMBtu. PG&E Gate hub activity eased by about 1 cent against the wider uptrend to an index at $2.842/MMBtu.

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On a regional basis, Northeast spot gas price action jumped by almost $10.66 to an index at $14.273/MMBtu, as Midwest next-day gas price activity picked up near 18 cents on the session to average at $2.734/MMBtu. Gulf Coast cash gas pricing logged a roughly 32-cent gain in deals averaging at $2.882/MMBtu, as West Coast day-ahead gas prices climbed by around 6 cents on average to an index at $2.586/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.