Late sale puts natural gas futures into the red after weather data recedes from month-end cold
Natural gas futures approached the $ 4.00 / MMBtu mark early Thursday after the long-term weather forecast tended to cool. But with models reducing the amount of freezing air in the final days of December, January’s Nymex gas futures contract stood at $ 3.766, down from 3.6 cents that day. February slipped 4.6 cents to $ 3.715.
In one look :
- Cooler end of December
- The five-year storage deficit is reduced
- Mixed Cash on Storm Systems
Spot gas prices were mixed on disorderly weather conditions in the West and Midwest, but mostly mild conditions elsewhere in the country. Spot Gas National Avg from NGI. edged up 4.5 cents to $ 3.875.
As traders rush to exit before the holidays, liquidity has gradually thinned in recent days. Only 114,238 January Nymex contracts traded on Thursday, while February contracts managed less than half that amount.
Bespoke Weather Services said that given the shift from high-end warm to something closer to normal at the end of the month – and the risks posed by a strong cold source in Canada with some blockage – ” prices would be justified at or even a little above the $ 4.00 level. . âIf the models keep risks cooler with the current supply / demand balance, a possible price increase should occur.
âIt’s just hard to find enough buyers in such a small market,â the company said.
Meanwhile, NatGasWeather said the midday Global Forecast System (GFS) generally held on to increases in heat demand seen in nighttime models, returning only four heating degree days (HDDs). However, the loss of demand occurred during the last days of December, which was an important period for the market as it could provide clues to weather conditions in early January.
The GFS remains a bit cooler than the European pattern for the last week of December, with the latter pattern reflecting a warmer trend over large swathes of the country from December 26 to 30, besides near the Canadian border. Essentially, the GFS model is either still a little too cold for this period, or the European Center (EC) model is too hot.
âThe GFS is not bullish, just closer to the Dec 25-30 season,â NatGasWeather said, as it advances at least a little chilly in the northern US. The EC, on the other hand, keeps the freezing bottled air over Canada.
Is winter over?
On Thursday, traders also had to digest the latest inventory data, which continued to show some tension in the supply / demand balance. The Energy Information Administration (EIA) reported an 88 Gcf withdrawal from storage for the week ending December 10. Bcf circulation and the five-year average of 114 Bcf.
However, when you consider that the benchmark week was nine hard drives hotter than the same week last year, the weather-adjusted shrinkage comparison would be nearly neutral, according to Mobius Risk Group. Without the widespread heat this month, it is likely that the year-over-year storage deficit would have widened in December, the company said.
Looking ahead to January – and the rest of 2022 – the direction the market is heading is to remain heavily weather dependent, according to Mobius. The firm noted that it is tempting for the market to extrapolate a hot December 2021 to the first month of 2022.
âThe last two very hot winter starts, 2015 and 2016, are years that have left an indelible mark on the minds of players in the natural gas market,â said Mobius.
However, if you take a closer look at the first five hot December months before this year (2015, 2016, 1971, 1982 and 1998) and the following January, the results are mixed, according to the company. One January in this dataset hard drives were 100 below normal, while another was 50 hard drives above normal.
âThe other three years of the dataset all saw near-normal January hard drive counts,â Mobius said. “In short, winter is not over yet.”
As for EIA storage data, there were few surprises among the regions.
The Midwest led with a solid 37 Bcf pullback and the East followed with a 25 Bcf pull, EIA said. The South Central recorded a circulation of 13 Bcf, which came solely from salt-free installations. Salt stocks have not undergone any net change.
Speaking on The Desk Enelyst’s online energy chat, Managing Director Het Shah said he was a little surprised that salt stocks were stable week to week. “I was expecting a small injection of 1-2 Bcf.”
This is noticeable as the salt stocks have been withdrawn in recent weeks, before the typical start of pull-ups in the area. In addition, the South Central is home to the vast majority of liquefied natural gas export facilities and multiple intra-state pipelines, for which gas flow data is not widely available.
Elsewhere in the country, mountain stocks fell by 7 billion cubic feet and Pacific stocks by 5 billion cubic feet, according to the EIA.
As of December 10, total gas in inventory stood at 3,417 billion cubic feet, 326 billion cubic feet lower than a year ago and 64 billion cubic feet lower than the five-year average, the agency said.
Mixed spot gas price
Gasoline spot prices were mixed on Thursday amid chaotic weather in parts of the country, which boosted demand.
On the west coast, the SoCal Border Avg. was up 13.5 cents to $ 5.490 for Friday gas delivery. El Paso Bondad’s cash soared 11.0 cents to $ 4.980.
Very modest price increases were seen in the Midwest, where high winds were expected to persist over the Great Lakes. As the strong wind system progresses eastward, light snow is expected to persist in the Upper Midwest.
Despite the cold, Chicago Citygate gas the next day only gained 1.5 cents to $ 3.605, while Dawn edged up 4.5 cents to $ 3.705.
The Northeast saw larger price increases, particularly in New England. Tenn Zone 6,200L spot gas jumped 33.5 cents to $ 3.915 for Wednesday’s gas day.
On the other hand, the southeastern locations ended the day mostly in the red as spring temperatures continued across the region. Cash at Transco Zone 5 fell 14.5 cents to $ 3.775. In Louisiana, Henry Hub slipped 7.5 cents to $ 3.675.