Natural gas forwards rose substantially for the period between Dec. 18 and 23 as declining production and the potential for much stronger demand resuscitated the markets after weeks of steady declines, NGI’s Forward Look shows.

Nymex futures rose 21.6 cents during that time, and most other forwards markets posted gains ranging from around 15 cents to 25 cents as production fell to just over 70 Bcf/d before the Christmas break.

There were a handful of exceptions, however.

New England’s Algonquin Gas Transmission Citygates saw the front of its curve recoup the previous week’s losses and then some after soaring an average of 61 cents for the front three months.

AGT January fixed prices jumped 68 cents between Dec. 18 and 23 to reach $5.545; February shot up 74 cents to $6.29, and the balance of winter (February-March) rose 58 cents to $5.486, Forward Look data shows.

The sharp increase in forward prices comes despite record low cash prices in the region, which fell below $1 Dec. 23, the first time such a level has been reached during the winter months, according to NGI historical price data.

But while the current price environment remains bleak, traders and other market insiders are looking ahead to the potential for a surge in natural gas demand, thanks to colder weather on the horizon.

The most recent weather models point to colder air arriving in the eastern U.S. late in the week, bringing about a period of much stronger demand for the first several days of January.

Indeed, Genscape data shows New England demand hitting 2.92 Bcf/d on Dec. 28 and then rising to 3.33 Bcf/d by Jan. 4.

Appalachian demand is projected to hit 12.71 Bcf/d on Dec. 28 and then surge to 16.71 Bcfd by Jan. 4.

Genscape, based in Louisville, KY, is a real-time data and intelligence provider for energy and commodity markets.

What market players will continue to watch is what weather models show beyond the early days of January. Some data suggests that the cold may not stick around past Jan. 4, while others favor the cold pool getting tapped adequately enough to bring fairly strong natural gas demand after that date, according to forecasters at NatGasWeather.

The bullish weather outlooks appear to have given the markets a running start as a surprise storage report lifted markets even higher on Thursday.

The U.S. Energy Information Administration reported a 32 Bcf pull from storage for the week ending Dec. 18, above most estimates in the mid- to upper-20 Bcf range. Those withdrawals were driven by activity in the Midwest and Pacific regions, while withdrawals in the East were unchanged week-to-week.

Inventories are now 561 Bcf above year-ago levels and 411 Bcf above five-year average, according to EIA.

The Nymex climbed back above the $2 mark following the report’s release.

“This still falls generally within the week-to-week variation of the data, not showing a big enough miss for a large price spike, but if this is the beginning of a trend in the coming few weeks, we should be seeing a gradual tightening of supply as production continues to slow and these much lower prices induce some level of demand,” said forecasters with Bespoke Weather Services.

Citi Futures’ Tim Evans also noted that traders could be squaring their books as options on January futures expire Monday and futures go off the board Tuesday.

“Traders squaring books ahead of the holidays are also more likely to be buyers than sellers, cutting risk positions ahead of the break that gives the weather forecast a chance to shift further,” Evans said. “So we may see some volatility at the front of the curve as books are squared in those instruments amid declining volumes and open interest.”