Natural gas fixed prices for December were up at most market hubs between Nov. 20 and 24 as a temporary bump in demand trumped yet another build in storage inventories, NGI’s Forward Look data shows.

One day ahead of expiration, the Nymex December contract closed Tuesday (Nov. 24) at $2.200, up 5.5 cents from Nov. 20, as residential/commercial demand in the United States reached its highest level so far this winter. The contract ended up going off the board Wednesday at $2.206.

Most other markets across the country followed suit, with December fixed prices averaging 3 cents higher between Nov. 20 and 24, and the balance of winter (January-March) averaging 2 cents higher during the same time frame, according to Forward Look.

New England, a region known for its volatility during the peak winter months, posted considerably larger gains, as cash prices there remained firmly in the $4 range at the start of the week before tumbling back to the $2 level Tuesday.

Algonquin Gas Transmission citygates December fixed prices jumped 13.6 cents between Nov. 20 and 24 to reach $5.23, while the balance of winter was up 9 cents to $7.116, Forward Look data shows.

The generally modest strength at other markets across the country comes as high-population regions like the U.S. Midwest and Northeast experienced a boost in demand early in the week, thanks to a weather system that sent overnight temperatures down into the teens and 20s.

But like so many other weather systems as of late, the most recent system is forecast to be followed by a high pressure system that will increase temperatures to as much as 18 degrees above normal by Thanksgiving and into the extended holiday weekend.

It’s a trend that appears to be sticking around through at least the first week of December, according to forecasters.

“With the failure of additional strong cold blasts to follow into the U.S. after this coming weekend, weather sentiment will remain bearish much of next week, and to our view, likely past Dec. 5,” forecasters with NatGasWeather said. “There will still be weather systems tracking across the U.S. with rain, snow, and cool temperatures, however, the pattern remains the same where swings in temperatures will occur every three to five days.”

Forecasters with Bespoke Weather Services agreed that the latest weather guidance offered little to sway the markets one way or another, remaining “slightly bearish to keep pressure on the natural gas market while keeping enough cooler/cold weather in the short and medium range to support prices close to their current levels.”

But while November has already been written off by the market, December will be watched closely as a lack of sustained weather-related demand so far this winter lifted record storage levels to even greater heights last week.

The Energy Information Administration on Nov. 25 reported a 9 Bcf build to storage for the week ending Nov. 20, within market expectations, but rare in terms of seeing an injection this late into the month of November.

Inventories now sit at 4.009 Tcf, 16% above year-ago levels of 3.445 Tcf and 6.7% above the five-year average of 3.757 Tcf.

And some experts say storage inventories could swell even further.

“It’s definitely possible we see another build as we’re already in a low-demand environment and we’re heading into Thanksgiving, which typically brings on a period of low demand,” said BTU Analytics senior energy analyst Michael Bennett.

“I give it another two weeks maybe before we start to see sustained demand show up,” Bennett said.

ICF International’s Kevin Petak, vice president of oil and gas markets, said weather is key to determining whether storage will continue to grow.

“The Northeast is more seasonal this week, but if it warms up, and that is what is forecast, then you probably will see more builds,” Petak said. “But we’re somewhat limited on capacity. The vast majority of fields are tapped out. You can’t inject anymore.”

Regardless of how many more builds the gas industry can squeeze out over the next couple of weeks, Petak said the industry is just days away from the start of the peak winter season, and withdrawals should kick in quickly.

“We’re starting to get into the heart of winter. Peak months are December-February,” Petak said. “So whether you’re warmer than normal or not is more indicative of the level of withdrawal, not whether you’re injecting or withdrawing.”

BNP Paribas’ Teri Viswanath, who said last week’s build may be the industry’s last for the season given this week’s chilly temps, said she and others will be watching withdrawals closely as concerns are mounting over the implications of the delayed start to winter.

“While the industry is finally addressing the surplus by drawing stocks down this week, there is concern that the abbreviated heating season ahead will not sufficiently reduce inventories to avoid an unmanageable imbalance next summer,” Viswanath, director of commodity research, said.

The consensus for end-of-winter storage ranges between 1.8 and 2.2 Tcf by the end of March, she said.

“Given a normal amount of restocking ahead next summer, this would guide inventories back to 4 Tcf by next October,” Viswanath added.

She noted, however, that with first quarter 2016 prices trading at the lowest point on the futures strip, producers are getting a clear message to curb supplies next year and could find it challenging to execute favorable hedging over the winter.

“There are even a few analysts that suggest the industry will witness net annual production declines in 2016,” she said.

Petak agreed $2 gas is not enough for many producers to keep drilling and said the longer the market stays in that range, the longer there will be a slowdown in drilling activity.

“That has more bite on production,” Petak said. “You have the market responding with the drilling activity, so eventually, prices will come back up. It’s just a matter of how the drilling activity will be slow.

“A lot of producers cannot make money at $2. Some areas of the Marcellus can still make money, but that’s not the case everywhere,” he added.

But it’s those areas in the Marcellus that Bennett said could keep production from falling to a net decline for the year, especially as takeaway capacity in the Northeast is expected to increase.

Three more pipeline projects totaling 1.3 Bcf/d in capacity are scheduled to come online in the region before year’s end, and REX’s Zone 3 Capacity Enhancement project is scheduled for a fourth quarter 2016 in-service.

“It’s going to take a lot for prices to come down to a level not economic in some of these plays in the Marcellus,” Bennett said.