• Possibility of cold returning later this month spooks jumpy natural gas market; January gains 5.7 cents
  • Near-term warmth, expected to last 10 days or more, could renew downside pressure if long-range cold risks ease
  • Storage inventories could fall dangerously low should cold weather sustain through the rest of winter
  • Spot gas mixed as chilly air set to linger another day before midweek warmup begins

Despite trading in the negative early Monday, the possibility of cold weather returning to the United States around Christmas was enough to send natural gas futures prices nearly 18 cents higher by midday. The Nymex January gas futures contract eventually went on to settle up just 5.7 cents at $4.545, while February slipped 1.8 cents to $4.360 and March slid 1.9 cents to $4.136.

Spot gas prices also were mixed following a chilly weekend as temperatures were expected to remain cold for another day before rising the remainder of the week. The NGI Spot Gas National Avg. fell 3.5 cents to $4.625.

On the futures front, the January contract traded as much as 10 cents lower Monday morning before hints of colder weather that showed up in overnight data remained intact in midday model runs. The threat of more cold weather before year’s end sent the prompt month up to an intraday high of $4.66 before some easing in the last hour of trading.

Long-range weather model guidance showed a return to a negative Eastern Pacific Oscillation pattern late Week 2 into Week 3 that presumably could return colder weather, according to Bespoke Weather Services. The firm, however, viewed the guidance as perhaps rushing this pattern change, as was the case with the incoming warmth.

Additionally, the blocking orientation does not yet appear correct to maximize cold in key demand regions; the Pacific Northwest and Great Plains could trend colder through Week 3 but a stubborn eastern ridge may keep gas-weighted degree days below average into the end of the year, the firm said.

“Models may be rushing these cold trends as more heating degree day losses are likely before then, making us think that prices can easily sell off when balances loosen later in the week,” Bespoke chief meteorologist Jacob Meisel said. “Yet the market is very jumpy as traders try and front-run the first sustained cold shot, so volatility stays very high and prices can spike when the cold signal is legitimate.”

Monday’s upturn in prices came even as mild high pressure was expected to spread across the central, northern, and eastern United States beginning Wednesday and continuing through Saturday, easing national demand considerably. Weather systems were forecast into the West early this week, with a notable tracking through the Southwest on Wednesday and then across Texas and the South Thursday-Saturday with another round of slightly cooler-than-normal temperatures, according to NatGasWeather.

Still, the chillier air was not expected to be nearly cold enough to offset milder-than-normal conditions across the rest of the country, the firm said. Several weather systems were then forecast to hit the United States Dec. 16-22, “but none very cold,” keeping national demand lighter than normal and where most of the data was milder trending during the weekend,” NatGasWeather said.

EBW Analytics said the milder conditions on tap for the next 10 days and beyond could renew downside price pressure, although the firm warned that any fall-off could be brief if forecasts for Week 3 trend colder -- “a possibility that has gained increasing support in recent runs of the European Ensemble.”

If support for this colder weather trend were to increase, “natural gas prices could soon return to the $4.60-4.90/MMBtu range,” EBW CEO Andy Weissman said.

Meanwhile, storage concerns remain, especially after the Energy Information Administration reported a slightly larger-than-expected withdrawal from inventories for the week ending Nov. 30. Bespoke said the 63 Bcf pull showed a market ready to very quickly tighten up in periods of colder-than-average weather, as demand shot higher and production eased off when cold arrived late in the week.

The firm projected a “solid draw” in the mid- to upper 80 Bcf range for this week’s report. “This will continue to emphasize that storage levels are dangerously low should we see significant cold sustain through the winter, though loosening on warmth will similarly indicate we need that cold to sustain for storage fears to really be justified,” Meisel said.

Spot Gas Mixed As Cold Temps Linger

Spot gas prices remained strong in certain areas of the country where chilly conditions continued, although several key demand regions began retreating Monday amid the warmup expected beginning midweek.

Most pricing hubs in Texas fell a few cents at most, although Permian Basin pricing was dealt a much sharper blow as prices plunged more than $1 in some areas. Waha was down 80 cents to $1.905.

Spot gas prices in California and the Rockies also retreated, with losses of as little as a couple of pennies to as much as $1.455. Opal dropped 8 cents to $5.425, and Malin fell 13.5 cents to $5.475.

In the Northeast, New England prices fell dramatically as Tenn Zone 6 200L dropped nearly $1 to $6.77. Transco Zone 6 non-NY slipped just 7.5 cents to $5.21.

Prices across Appalachia, on the other hand, rose as much as nearly 18 cents amid reports of the region’s first pipeline freeze-offs. Transco-Leidy Line netted that substantial increase, while Dominion South rose 10 cents to $4.36.

On the pipeline front, Rover was set to reduce the capacity on the Sherwood lateral on Dec. 12 and 13 and on the Majorsville lateral on Dec. 18-19 because of planned maintenance.

The Sherwood location’s (meter 70001) operational capacity is to be reduced to 430 MMcf/d on Tuesday (Dec. 11) and to 500 MMcf/d on Thursday (Dec. 13). Sherwood just began nominating on Nov. 1 and has averaged 563 MMcf/d since then -- amounting to a 120 MMcf/d and 63 MMcf/d reduction, respectively, according to Genscape Inc. Columbia Gas Transmission (TCO) is likely to pick up the displaced nominations from this outage, natural gas analyst Vanessa Witte said.

Likewise, Majorsville (meter 70004) is be reduced to 170 MMcf/d on Dec. 18 and 250 MMcf/d on Dec. 19. Majorsville has averaged 354 MMcf/d for the past 30 days, amounting to reductions of about 184 MMcf/d and 104 MMcf/d, respectively, according to Genscape. Texas Eastern Transmission and TCO are likely to pick up the displaced nominations, Witte said.

Over in the Midcontinent, prices rose less than a dime, while even smaller increases were seen in Louisiana. Benchmark Henry Hub was up just 2.5 cents to $4.505.