In the wake of a major sell-off to start the week, natural gas futures gained back some of those losses Tuesday as the latest weather data returned demand to the outlook. The January Nymex contract added 3.2 cents to settle at $2.264/MMBtu, while February settled at $2.263, up 2.9 cents.

Meanwhile, a wave of spot price gains in the Northeast and Mid-Atlantic lifted NGI’s Spot Gas National Avg. 22.0 cents to $2.375.

Futures traders entered the week contemplating “big demand losses” from guidance over the weekend, but as of Tuesday afternoon the last few model runs had added to demand expectations over the 15-day outlook period, according to Bespoke Weather Services.

Even so, “the pattern still averages below normal in terms of demand over the next couple of weeks,” Bespoke said. “We just appear to be finding the potential for a few colder days to mix in the background milder state.

“...When could we see a meaningful turn back colder? We feel the next shot falls sometime around the turn of the new year, as that appears to be when tropical forcing may become more favorable for shaping the pattern in a way that can deliver cold into the U.S. once again.”

With the latest Commodity Futures Trading Commission data showing managed money piling on the short positions, the current dynamic “screams for a short covering rally,” according to analysts at Enverus. However, fundamentals point to further price declines, they said in a recent note.

“Market internals developed a slightly bearish bias as prices failed on the rally early last week, only to decline and break lower on significantly higher volume and higher open interest,” the Enverus team said. “Prices confirmed the intermediate high end of the range last week when they failed at a test of $2.51. Prices are now testing support and have opened the trade this week with a gap from last Friday.

“Further declines will take prices to the area of support between $2.187 and $2.159 and down to $2.12, and potential exists for an eventual break down to the August lows of $2.029.”

Looking longer-term, in a recent note to clients, analysts at Energy Aspects said 2020 prices remain under bearish pressure based on “lackluster” pipeline exports to Mexico -- even with the start-up of the Sur de Texas-Tuxpan pipeline -- and based on production readings showing output “on a veritable tear.”

“November flow data are suggesting a 1.1 Bcf/d increase month/month, and if the current clip of daily production readings is maintained for the rest of the month, December output would be up by 0.9 Bcf/d month/month,” Energy Aspects said. “Given the momentum of recent production, it would appear that follow-on growth should be expected for December unless weather is cold enough to prompt freeze-offs in some producing regions.

“Such an exceptionally strong pace of 4Q2019 production growth calls into question how much it will slow in 1Q2020,” according to the firm. “For some time, our balances have called for a slowdown in sequential growth in 1Q2020 as a way to contain end-March storage below the psychological 2.0 Tcf level. Our average 1Q2020 sequential growth per month is at just below 0.3 Bcf/d, but the jury is still out on whether momentum will slow enough for this expectation to be feasible.”

There are signs that Appalachian growth is slowing, Energy Aspects said. Haynesville Shale output “picked up substantially” amid higher cash prices in early November but has backed off since then.

“Bakken has not been hitting the same highs as it had earlier in November, when it was just above 2.0 Tcf, but additions to processing infrastructure suggest further boosts in the region should be expected,” the firm said.

Meanwhile, on the demand side, liquefied natural gas (LNG) feed gas volumes reached a new record high recently, topping the 8 Bcf/d mark, according to estimates from Genscape Inc. The firm recorded 8.01 Bcf/d of total feed gas deliveries to U.S. LNG facilities for Sunday.

“Deliveries to Cameron have surged as the terminal initiates startup of its Train 2,” Genscape senior natural gas analyst Rick Margolin said. For Monday “deliveries topped 0.8 Bcf/d for the first time in that facility’s history, lifting the last seven-day average of 0.55 Bcf/d.”

Freeport LNG, which just announced the start of commercial operations at its Train 1, has seen feed gas flows reach record highs over the past three days, topping 0.78 Bcf/d, Genscape estimates show. That’s compared to an average 0.34 Bcf/d over the past 30 days.

“Train 2 at the terminal is in the process of spooling up commissioning activity, with full liquefaction expected to begin by the end of the month,” Margolin said.

As for the Corpus Christi LNG terminal, deliveries have averaged 1.56 Bcf/d over the past six days after briefly dropping earlier in the month, the analyst said.

Wintry Weather Headed East

An eastward-moving cold front helped drive strong spot price gains over the Northeast and Mid-Atlantic Tuesday, particularly for the often supply-constrained New England hubs. Tenn Zone 6 200L jumped $1.990 to $4.455. Further south, Transco Zone 5 picked up $1.040 to $3.205, while Dominion Energy Cove Point added $1.015 to $3.195.

“A cold front stretching from the northern Appalachians to the western Gulf of Mexico” was “marching towards the East Coast” Tuesday afternoon, according to the National Weather Service (NWS). “This front is responsible for widespread showers and periods of rain extending from the southern Plains to the Northeast.

“Behind the cold front, precipitation is falling in the form of snow and a wintry mix across parts of the Mid-South, where light accumulations are possible,” according to the forecaster. “As sub-freezing temperatures aloft funnel in behind the cold front, rain will change over to snow in the Mid-Atlantic and Northeast” Tuesday night into early Wednesday.

NWS was calling for “light accumulations” in the Northeast, as well as in the central and southern Appalachians.

Spot prices also strengthened throughout Appalachia Tuesday. Dominion South climbed 11.5 cents to $1.870, while Columbia Gas gained 8.5 cents to $1.930.

Planned maintenance in West Virginia on Columbia Gas Transmission’s (TCO) SM-80 system could limit up to 210 MMcf/d flowing into Columbia Gulf on Wednesday and Thursday, and again on Dec. 20-21, according to Genscape analyst Anthony Ferrara.

“While work will be performed from Dec. 11-20, impacts to flow are only expected to occur for two days each at the beginning and end of the work,” Ferrara said.

Price adjustments were generally steady for much of the rest of the Lower 48. Benchmark Henry Hub added 4.5 cents to $2.180.

In the Midwest, most hubs traded close to even. Joliet eased half a penny to $2.115. Over on the West Coast, Malin added 3.5 cents to $2.620.