Physical natural gas for Tuesday delivery shot higher Monday as the December futures contract went out like a lion and buyers made up for lean purchases ahead of the long holiday weekend.
Last Wednesday the NGI National Spot Gas Average shed 9 cents to $2.62, but Monday's activity saw the NGI Average rebound a stout 23 cents to $2.86. Only one point followed by NGI fell into the loss column, and gains in the Midwest, Midcontinent, Texas, Louisiana, the Rockies and California all dove deep into double-digits.
Strength in the expiring December contract also did not go unnoticed, and at the close, December had added 14.7 cents to $3.232, and January had risen 11.8 cents to $3.320. January crude oil added $1.02 to $47.08/bbl.
"What I think happens is the holiday stuff just gets depressed a little bit," said an industry pipeline veteran. "It's back to reality, and the screen will help prices adjust accordingly. It will all come down to when people start pulling from storage and if we see a correction.
"With the demand now, everyone is pulling from physical gas, and the storage players won't come out until you see an extended cold front and high temperatures in the 30s."
The central portion of the country saw hefty double-digit gains on the day. Gas at the Chicago Citygate jumped 24 cents to $2.94, and deliveries on El Paso Permian added 37 cents to $2.85. However, gas bound for New York City on Transco Zone 6 rose just 4 cents to $2.40, while gas at the Henry Hub gained 17 cents to $2.91.
According to meteorologists, wintry weather will drop down into the Central Plains and make its wary eastward during the week.
"Snow, wind and cold air will expand over the northern Plains and will make for slippery travel during the first part of this week," said AccuWeather.com meteorologist Alex Sosnowski. "A large storm hovering over the Upper Midwest will funnel both moisture and air cold enough for snow across the northern Plains through Tuesday night.
"By the middle of the week, snow showers will linger over the northern Plains and will extend to the western Great Lakes region. A few communities from eastern Minnesota to Wisconsin and Iowa could be hit with a heavy snow shower that quickly coats roads. Winds in parts of the High Plains from eastern Wyoming to western South Dakota and Nebraska can gust close to 60 mph by Tuesday. Elsewhere, gusts to 40 mph will be common from Kansas to North Dakota and Minnesota."
Sosnowski said temperatures in the northern Plains for most of this week still would average a few degrees above normal.
"However, it will be a notable change from autumn temperatures, which were 8-12 degrees above average," he said.
AccuWeather.com meteorologist Paul Pastelok also weighed in.
"Looking ahead, indications are that cold air will hold on and strengthen over much of the western United States and be a frequent visitor to the North Central states during December," he said. "In addition, more significant storms could track close enough to bring rounds of significant snow from parts of the central and northern Plains to perhaps the western Great Lakes region."
California quotes were buoyed by strong next-day power. Intercontinental Exchange reported that on peak Tuesday power at SP-15 rose $4.43 to $37.04/MWh.
Gas at Malin surged 41 cents to $2.99, and deliveries to the PG&E Citygate added 39 cents to $3.58. Deliveries to the SoCal Citygate were quoted 59 cents higher at $3.41, and gas priced at the SoCal Border Avg. Average added 54 cents to $3.16.
Longer term, traders were focused on not only weather, but trends in drilling and production.
Sunday overnight weather models turned colder in the more extended time frames.
"Trends were in the colder direction across a wide portion of the U.S. in this period, but confidence remains rather low" as it relates to the Madden Julian Oscillation "and whether models are portraying its evolution correctly," said MDA Weather Services in its Monday morning 11-15 day outlook.
"The forecast gives consideration for the signal to be propagating from its current phase three toward phases four/five about this time. These are warmer correlating phases for the Eastern Half, and the forecast fades the colder models here as a result.
"The Pacific regime that results from these phases can be characterized by the -PNA [Pacific North American oscillation], which has a focus for colder air being in the Rockies and Pacific Northwest.
"Models highlight colder risks in the Eastern Half, with this likely related to models allowing for some MJO reemergence into phases one/two. Risks are mixed in the West."
The bullish case continues to be enhanced by a slow response by the production community and near-term production losses.
Rig counts inched higher before the Thanksgiving holiday but continue to lag year-ago and long-term averages. Gas drillers added two rigs and oil operators raised three for the week, Baker Hughes Inc. said. Overall, the North American total rig count was down by five week/week to 767 from 772, and it declined from 928 in the year-ago period. The five-year average is 2,020.
The number of U.S. rigs last week that were drilling for gas stood at 118, 71 fewer (38%) than a year ago. There also were 474 oil rigs in operation, down 81, or 15%, year/year.
"Spring Rock daily pipe production data shows Lower 48 production slipped during the holiday weekend but is gradually recovering," said industry consultant Genscape Inc. in a Monday morning report. "We noted on Friday that the production declines were primarily a result of -- what we believe to be -- maintenance in the Gulf of Mexico at the Lucius and Hadrian platforms."
Discovery Gas receipts from the nearby Keathley Canyon Connector to Junction meter "fell to just 9 MMcf/d on Thanksgiving, after having averaged 440 MMcf/d in the preceding 14 days," Genscape said. "Nominated volumes were fully restored by Sunday."