In a shortened trading day Friday ahead of the Christmas holiday, natural gas futures nosed higher as forecasts continued to show frosty weather through the end of the year.
Arctic air was expected to begin dropping temperatures to below-normal levels in parts of the country over the long weekend, helping lift the NGI National Spot Gas Average 26 cents to $3.03/MMBtu.
After trading as high as $2.673 Friday on reduced volume, January -- set to expire next week -- settled 6.9 cents higher at $2.667, bouncing back from contract lows set the day before. February settled 6.6 cents higher at $2.658.
Forecasts ahead of the extended weekend continued to show the potential for significant heating demand.
In its six- to 10-day forecast Friday, MDA Weather Services said, "Overall, this remains a broadly colder than normal period nationally and includes much and strong below normal coverage from the Midwest to the East. This comes downstream of ridging over Alaska and the Bering Sea, features which are strong enough to provide a pathway for cold arctic air directed toward the Lower 48.
"Additional cold risk is associated with this setup, particularly through the mid-period in the East nearby the polar vortex."
As for PointLogic Energy's latest six- to 10-day Friday, analyst Alan Lammey said the firm saw U.S. population-weighted temperatures averaging 30.8 degrees during the period, about 0.9 degrees colder than average.
"The five-day timeframe will start with a stronger southern storm that develops and tracks northeastward over the Ohio Valley and into interior New England from Dec. 27 through Dec. 29. Currently, the weather development looks to become a snow-to-rain event for the large metropolitan cities and locations of the Interstate 95 corridor, while a larger snow event may occur along the more northern portions of the Northeast.
Across the northern United States for the period, "the major models are indicating that generally cold temperatures producing conditions that are 10-15 degrees below normal...will be commonplace for much of" the six- to 10-day, Lammey said. "Elsewhere, the upper Midwest is projected to see potentially some of the brutally coldest temperatures in the nation."
But even with supportive weather, not to mention a bullish 182 Bcf storage withdrawal reported by the Energy Information Administration Thursday, the technical picture for natural gas shifted after January broke below long-standing support around $2.750.
NatGasWeather.com said how long the cold sticks around in the new year could determine how the market responds following the Christmas break.
"Essentially, the onus is clearly on cold lasting after Jan. 4 when considering the Arctic blasts expected prior to then failed to rally this market," the firm said. "Why prices sold off so strongly in spite of this cold pattern can only be explained fundamentally by record production.
"Therefore, it is quite difficult to know how the markets open after the break since cold weather patterns don't seem to matter one bit to whatever entities were doing all the selling this week."
U.S. drillers tacked on another natural gas-directed rig ahead of the holiday, according to data released Friday by Baker Hughes Inc. (BHI). After netting one rig overall, the United States ended the week with 184 natural gas units, up from 129 running a year ago.
Earlier in the week, EIA released its Drilling Productivity Report, predicting that the Marcellus and Utica shales will lead gas production growth in January, averaging an estimated 26.37 Bcf/d, up from 26.03 Bcf/d in December.
Meanwhile, the Ohio Department of Natural Resources released data recently showing Utica Shale producers grew their output 27.5% year/year and 18.5% sequentially during the third quarter.
PointLogic Energy's data showed Northeast production approaching 27 Bcf/d for Friday and averaging around 26.7 Bcf/d month-to-date.
As of Friday, the combined Marcellus/Utica rig count stood at 75, up from 59 a year ago, according to BHI.
In the spot market Friday, cold temperatures were expected to begin pouring into the northern United States and Midwest over the long weekend, enough to lift prices for multi-day deals.
The Midwest Regional Average climbed 10 cents to $2.66, helped along by double digit gains at points like Chicago Citygate and Joliet.
MDA was expecting temperatures in Chicago and Cincinnati to drop to below-normal levels -- including lows in the teens and 20s -- by Monday.
In the Midcontinent, prices at Northern Natural Demarcation jumped 13 cents to $2.64. The pipeline put out a safe operating limit alert to customers across all zones for the Dec. 25 and Dec. 26 gas days, citing "lower than normal system-weighted temperatures."
In the Southeast and Mid-Atlantic, Genscape Inc. was forecasting demand to ramp up to 18.82 Bcf by Christmas Day, up from a prior seven-day average of 16.1 Bcf/d, and spot prices firmed throughout the region. Transco Zone 5 surged 69 cents to $3.27, while Transco Zone 4 climbed 7 cents to $2.62.
AccuWeather on Friday called for lows in Boston to dip into the 20s Sunday and Monday before potentially reaching the teens by Tuesday.
New England pipeline operators were bracing for weather-driven constraints. Iroquois Gas Transmission put out a notice Friday that customers would be required "to adhere to their scheduled volumes" beginning with Saturday's gas day and continuing through Jan. 2. Tennessee Gas Pipeline expanded an operational flow order (OFO) to include all of its Zones 4, 5 and 6 beginning with Tuesday's gas day. An OFO issued earlier in the month remained in effect for Algonquin Gas Transmission.
AGT Citygate surged $4.64 to average $11.27 Friday, while Tennessee Zone 6 200L similarly jumped $4.76 to average $12.00.
Out West, prices at SoCal Border Average -- along with prices in the Arizona/Nevada region -- pulled back after big gains the last two days.
Southern California Gas (SoCalGas) notified customers Friday that its Line 4000 Maintenance -- expected to restore capacity through the utility's Needles receipt point along the California/Arizona border -- was complete. As a result, SoCalGas will be able to receive 870 MMcf/d through its Northern Zone, including the restoration of 270 MMcf/d of capacity through Needles, according to the utility.
SoCal Border Average fell $1.11 to $3.22.