With warmer forecast trends over the weekend showing exceptionally frigid Lower 48 temperatures subsiding after Christmas, natural gas futures were down sharply in early trading Monday.
The January Nymex contract was down 44.0 cents to $6.160/MMBtu at around 8:45 a.m. ET. February was off 35.8 cents to $5.945.
While weather models over the weekend did show Arctic cold advancing further south later this week and into the weekend, the data trended warmer for the Dec. 27-Jan. 1 time frame, according to NatGasWeather.
Based on updated forecasts “the frigid cold pool retreats into Canada” during this period, allowing warmer-than-normal conditions to spread over the Lower 48 and leading to weaker weather-driven demand, NatGasWeather said.
“With highs of 60s and 70s over the southern U.S. Dec. 27-Jan. 1 and highs of 20s to 50s over the northern U.S., national demand will drop to light levels,” the firm said. “How long this warmer than normal pattern extends into January will be of great interest, since the longer it holds, the more likely it’s going to disappoint.”
Weekend forecasts advertised a “collapse” in weather-driven demand expectations for the Dec. 30-Jan. 5 storage week, which has “reduced the threat posed” by the intense cold expected to result in hefty withdrawals in the interim, according to EBW Analytics Group.
In the nearer term, heating demand is set to surge heading into the Christmas holiday, EBW analyst Eli Rubin said.
This comes as production could see impacts given that “freeze-off risks are in play” for the Bakken Shale, Rockies and Midcontinent regions, as well as parts of Texas, according to the analyst.
“While the extent of freeze-offs is difficult to predict, near-term upside for Nymex gas futures is possible as spot prices escalate,” Rubin said.
Still, examining the market outlook on a seasonal basis, the expected warm-up by the start of the new year “again narrows risks to natural gas supply adequacy,” Rubin added. “With the market able to see the end of the coming cold blast within the 11- to 15-day window, strong downward price pressure is favored into mid-winter.”
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December 19, 2022 at 09:01PM
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Natural Gas Futures Plunge as Cold Blast Seen Fading by New Year's - Natural Gas Intelligence
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