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Supportive weather drives additional gains in January 2018 gas futures

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Essential Energy Insights - November 2021


Supportive weather drives additional gains in January 2018 gas futures

In its first day in the lead position, NYMEX January 2018 natural gas futures continued to advance Wednesday, Nov. 29, gaining traction again from supportive weather forecasts ahead of the release of the latest round of weekly storage data.

Tacking on 11.1 cents in the Nov. 29 session, the front-month contract settled Wednesday at $3.179/MMBtu, up 5.1 cents, after posting a two-week high on the spot continuation chart at $3.218/MMBtu.

"The natural gas market is extending its price recovery as the near-term temperature outlook continues to trend cooler, adding heating demand into the fundamental equation for the weeks ahead. Expectations for Thursday's DOE storage report continue to run in the 35-40 bcf range, less than the 47-bcf five-year average for the week ended November 24, and the temperatures this week suggest a further bearish storage report before the impact of the colder temperatures is felt," Tim Evans, energy analyst at Citi Futures, wrote in a Nov. 29 morning research note to clients.

According to the National Weather Service's six- to 10-day forecast, above-average temperatures are expected to hold over the bulk of the country's eastern two-thirds and a small section of the Southwest, with average to below-normal conditions pegged for much of the West and in areas of the west-central U.S.

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The agency's eight- to 14-day projection, however, is calling for normal to below-average temperatures across much of the central and eastern U.S., containing the scope of above-average temperatures to much of the West Coast, a small area of the Midwest and an area of the extreme Northeast.

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Increasingly colder weather is on the horizon, which should lead to larger gas storage withdrawals in the weeks ahead as natural gas demand increases.

Analysts and traders surveyed are calling for a storage pull from 30 Bcf to 47 Bcf, with a consensus withdrawal pegged at 38 Bcf for the week ended Nov. 24. The latest figure will compare to a 43-Bcf year-ago pull and the 47-Bcf five-year average withdrawal.

For the week ended Nov. 17, the U.S. Energy Information Administration reported a net 46 Bcf was pulled from storage, leaving total U.S. working gas at 3,726 Bcf, or 319 Bcf below the year-ago level and 121 Bcf below the five-year average of 3,847 Bcf.

Amid two days of gains in the futures market, next-day natural gas values at the major U.S. consuming hubs were poised higher during the midweek session.

In the Northeast, product for Thursday flow at Transco Zone 6 NY came in around $3.05/MMBtu, rising almost 10 cents. Tetco-M3 gas was priced at an index near $2.65/MMBtu, up more than 5 cents on the day.

At the producing region, next-day gas prices at the benchmark Henry Hub market in Louisiana saw an average around $3.05/MMBtu, up 15 cents on the session.

In the Midwest, spot gas at Chicago ran up 15 cents to right around $3.00/MMBtu. To the south, day-ahead gas at Demarc was also up 15 cents to an index near $2.90/MMBtu.

On the West Coast, day-ahead gas at PG&E Gate notched an average at almost $3.20/MMBtu, increasing about 5 cents. Gas at the SoCal Border market was marked at an index around $2.85/MMBtu, advancing 10 cents on the day.

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.