Natural gas futures moved higher Monday as the potential for another blast of Arctic cold in early February held the market’s attention more than moderate temperatures over the next couple weeks. Meanwhile, spot prices softened in the East on warmer weather as points gained further West. The NGI National Spot Gas Average finished 10 cents lower at $3.00/MMBtu.
The February contract settled 3.9 cents higher at $3.224 Monday after trading as high as $3.269 and as low as $3.143. The March contract settled a penny lower at $2.931.
Forecasters Monday continued to point to signs for cold to arrive the first week of February.
An afternoon run of the European weather model came in "a little warmer Jan. 28-29...however, the first week of February remains more important as frigid Arctic air pours into the Rockies and Plains Feb. 1, then gradually advances across the Midwest and into Texas Feb. 2-3," NatGasWeather.com told clients Monday.
"It's a reinforcing Arctic blast arriving into the northern U.S. Feb. 3-6 where the European model is colder than the rest of the data, in a relatively ominous setup," the firm said, noting the European remains "colder than the other major weather models for this important period."
Commodity Weather Group President Matt Rogers said the outlook continues to "lose demand on the current week and next week, but it has been slowly progressing forward on a cold pattern shift" showing another blast of Arctic air arriving "for that second week of February."
When a ridge of high pressure develops over Alaska, the pattern suggested in the data Monday, "we tend to get some pretty strong cold out of that," Rogers said.
Forecast confidence is low in terms of the duration, but the cold could last for a two to three week period, according to Rogers. This winter's shaping up to be "very similar to the winters of 2013/14 and 2014/15, when we had a lot of periodic cold" with "warm interludes in between," he said.
Bespoke Weather Services described a "battle between short-term gas-weighted degree day (GWDD) losses and long-term GWDD additions" in the latest round of data.
"Over the next couple of days we could continue to see some weakness from widespread warmth that will linger into the first couple days of February," Bespoke said.
"Yet afternoon European guidance showed a significant amount of cold risk later in the first week of February and into the second week that would easily be able to boost the prompt month February contract into the $3.32 resistance level we have been watching, and eventually would begin to prop up the March contract as well, which may catch more of a bid once February goes off the board if this cold can linger."
The February contract continued to climb after the settle Monday, trading up around $3.245 by 4 p.m. EDT.
"We'll see if this cold can break us out to the upside...technically speaking though, we've got a lot of congestion in this area, so if it's going to move higher, it better get going," Powerhouse's Elaine Levin, president, told NGI.
Given upside price risks -- including the potential return of Arctic cold next month, plus expectations for another large storage withdrawal from the Energy Information Administration this week -- Levin said she would expect the February contract to "consolidate towards the upper end of this range at $3.10 to $3.25."
If the prompt-month can settle above last week's intraday high of $3.288, the next target would be the $3.43 high set in May 2017, according to Levin.
Meanwhile, the lack of near-term heating demand took its toll on cash prices across much of the eastern third of the country Monday.
"U.S. population-weighted temperatures have run into a mild streak that has seen demand levels plummet," PointLogic Energy Vice President Jack Weixel said in a note to clients Monday. "From a high of 117.6 Bcf/d on Jan. 17, domestic demand for Jan. 22 is 41 Bcf/d lower, a 35% swing downwards over the course of just five days.
"The week ending Jan. 26 is also setting up to realize much lower demand -- PointLogic's forecast is 83 Bcf/d, a 24.2 Bcf/d drop from the week ending Jan. 18."
Radiant Solutions forecast temperatures to come in around 17.5-19.5 degrees above normal Tuesday along the I-95 corridor from Washington, DC, to Boston.
Algonquin Citygate fell for the third straight trading day, dropping $2.29 to average $3.11. Monday marked the first time Algonquin Citygate traded at a discount to Henry Hub since early December.
In the Southeast, Transco Zone 5 dropped 20 cents to $3.13, while in Appalachia, Tetco M3 Delivery tumbled 51 cents to $2.82.
Spot prices strengthened at a number of points out West Monday.
In California, SoCal Citygate added 8 cents to average $3.39. This came after SoCal Citygate flipped from negative to positive basis in Friday's trading. Southern Border and SoCal Border Average also finished higher Monday.
Genscape Inc. analyst Joseph Bernardi said colder weather over the weekend drove a pop in demand for utility Southern California Gas (SoCal).
SoCal reported an estimated system demand for Monday of 3,474,000 Dth/d, with the utility forecasting demand to remain above 3,200,000 Dth/d for the next three days.
As of Monday, "SoCal's posted demand number for Monday's gas day is the second largest of the winter, and Sunday's was the fourth largest," Bernardi told NGI. "Imports have been disrupted by the unplanned resumption of maintenance on SoCal's Line 4000. The net effect has been a cut of about 125 MMcf/d.
"This has occurred via the cut of imports from Transwestern and Southern Trails at Needles (a drop of around 250 MMcf/d) and an increase in volumes via interruptible capacity at Kern-Kramer Junction (up around 125 MMcf/d)."
East of SoCal Citygate, in the Arizona/Nevada region, El Paso South Mainline/N. Baja added 7 cents to average $2.95, while Kern Delivery climbed 7 cents to $2.92.
West Texas prices also saw a bump Monday. El Paso Permian added 11 cents to average $2.66, while Transwestern jumped 24 cents to $2.67.
In the Rockies, Kern River added 6 cents to $2.77.