February natural gas is expected to open 3 cents lower Wednesday morning at $3.30 as weather models stabilize and pipeline operators ready for oncoming high usage. Overnight oil markets rose.
Overnight weather models showed little overall change with a slightly colder one- to seven-day outlook balanced by a warmer eight- to 14-day period.
"After the weekend's major changes, the models appear to be settling for now on this new narrative," said Matt Rogers, president of Commodity Weather Group, in a morning report to clients. "The short-lived colder period in the front half of the forecast period gets a little bit stronger on [Wednesday's] update, which adds some demand to the balance of this week into the start of next, but then the return to warmer weather later next week gets just a bit warmer today with some demand losses in that window. Most of the demand gains today are found in the Midwest to East, but at times in the South and West, too. The late six-10 day into 11-15 day losses are strongest into the East and South, but also into the Southwest and Midwest at times."
The phalanx of cold marching into the Midwest has pipeline operators scrambling to balance flows with high demand. "The cold weather system is migrating south and eastward into the Midwest market and causing several Midwest pipelines to begin issuing warnings and system limitations," said industry consultant Genscape in a morning report to clients. "We are showing Lower 48 demand is up to a 15-day high at 92.4 Bcf/d, with Midwest demand up to 17.5 Bcf/d, a 3.65 Bcf/d day-over-day increase.
"Midwest pipelines are putting out notices warning of potentially strained operating conditions. Guardian, Midwest Gas, Missouri River Transmission, NGPL and Viking have all issued warnings of high demand sharply limiting system flexibility. NNG has implemented an SOL (system overrun limitation) for all market zones, and Carlton Resolution rules are in effect.” Genscape estimates Midwest population-weighted heating degree days (HDD) to be up to 51 Wednesday -- versus normal at 41 -- and they are forecast to reach 56.2 by Friday.
The forecast cold has yet to manifest itself in elevated heating loads, according to National Weather Service (NWS) figures. For the week ending Jan., 7 NWS predicts that New England will see 242 HDD, or 35 fewer than normal. The Mid-Atlantic is projected to experience 235 HDD, or 22 fewer than its seasonal norm, and the greater Midwest should have 272 HDD or 19 fewer than its seasonal tally.
The Desk's Early View storage survey of 12 traders for the week ended Dec. 30 showed an average 75 Bcf withdrawal and a range of 65 Bcf to 92 Bcf. Last year 117 Bcf was withdrawn and the five-year average comes in at 129 Bcf.
In overnight Globex trading February crude oil gained 35 cents to $52.68/bbl and February RBOB gasoline rose a penny to $1.6356/gal.