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Latest winter storm in US stokes bullish reaction from gas futures market

Another blast of wintry weather that's forecast to bring frigid temperatures to the US Midwest and a mix of freezing rain, ice and snow to the Atlantic Seaboard began affecting gas markets already on Friday.

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In late-morning trading, cash prices at the benchmark Henry Hub surged to over $4/MMBtu for weekend flow dates. At the Transco Zone-5 hub in North Carolina and Zone-6 hub in New York, prices surged to more than $20/MMBtu Friday.

Further north, in the Boston metro area, prices at Algonquin city-gates hub climbed to $18/MMBtu, data from Intercontinental Exchange showed.

While the approaching winter storm's impact on temperatures and gas demand is forecast to fall short of early January's "bomb cyclone," the futures market now appears to be keeping a more watchful eye on the cumulative supply impact of recent wintry weather impacting much of the eastern US.



On the NYMEX Friday, the prompt-month February contract gained more than 12 cents/MMBtu, settling at $3.20/MMBtu, its highest since early November.


MARKET IMPACTS TO EXTEND THROUGH THURSDAY


On Friday, winter weather was already impacting states in the Midwest where a mix of snow and ice saw the region's population-weighted temperature plunge to just 20 degrees Fahrenheit.

In response, gas demand across the Midcontinent surged to 29 Bcf/d Friday, its highest since early January. At the Chicago city-gates, prices were elevated Friday, trading just shy of $4/MMBtu. Prices at the Midwest hub are up from under $3/MMBtu at midweek, S&P Global Platts data show.

Over the weekend and into early next week, Midwest temperatures are forecast to dip into the low teens Fahrenheit, lifting total gas demand there to over 30 Bcf/d over a consecutive five-day period.

In the Northeast, the storm's impact is forecast to intensify over the weekend as population-weighted temperatures dip below 20 degrees F. By Sunday, regional demand will spike to nearly 34 Bcf/d and is forecast to remain above 30 Bcf/d through Thursday, S&P Global Platts Analytics data show.

In preparation for elevated demand, Columbia Gas Appalachia on Friday issued a storage critical day notice effective from Sunday through Thursday, warning shippers that gas withdrawn in excess of 103% of nominated volumes would incur penalties.


STORM TO LIFT WINTER 2017-18 HEATING DEMAND TO 4-YEAR HIGH


By Sunday, US residential-commercial gas demand is forecast to approach 60 Bcf/d and remain in the upper 50-Bcf/d range through the middle of next week.

Although demand will remain well below levels seen in early January at over 78 Bcf/d, the impact on winter 2017-2018 heating demand is currently forecast to lift this season's cumulative residential-commercial figure to an average 42.5 Bcf/d since November 1.

At that level, US gas demand from homes and businesses this season will be at its highest since the polar vortex winter of 2013-2014.

Looking further ahead, looming demand from this latest winter storm is also expected to significantly deplete storage stocks over the coming days.

In fact, for the week ending January 19, S&P Global Platts Analytics is currently forecasting a 234 Bcf withdrawal from inventory, a figure that would outpace the five-year average draw by some 70 Bcf, according to data from the US Energy Information Administration.

-- J. Robinson, jrobinson@spglobal.com
-- Samer Mosis, samer.mosis@spglobal.com
-- Edited by Joe Fisher, newsdesk@spglobal.com