• Forecasters predicted colder conditions for early December
  • Liquefied natural gas volumes held near record levels
  • Spot prices soared amid freezing temperatures

Natural gas futures climbed Monday as more intense winter weather loomed and forecasters predicted colder temperatures over the first half of December, increasing the likelihood of greater heating demand.

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The January Nymex contract rose 3.9 cents day/day to settle at $2.882/MMBtu after taking over as the prompt month following the Thanksgiving holiday. February advanced 3.3 cents to $2.865.

NGI’s Spot Gas National Avg. soared 60.5 cents to $2.825 as temperatures were colder to start the week across the nation’s midsection following benign weather over the long holiday weekend. Chilly rains doused swaths of the East.

For futures, Bespoke Weather Services said the potential for a winter freeze after a warm November appeared to be the leading “catalyst for the move higher” Monday.

“The pattern depicted as we move toward the middle of the month is one that hints at drawing some stronger cold out of Canada into the U.S. pattern,” the forecaster said. “Any true cold could target the middle of the nation most, as the pattern shifts more toward a typical La Niña state.”

EBW Analytics Group said that, “following exceedingly mild weather in mid-November and the Thanksgiving holiday,” even briefly cooler temperatures to start the week “may allow weather-driven demand this week to springboard 10.0 Bcf/d higher” week/week. Additionally, a “seasonal progression towards colder temperatures” before mid-December, could drive gas demand “another 8.5 Bcf/d higher next week.”

Liquefied natural gas (LNG) volumes hung above 10 Bcf Monday, near an all-time high, while production levels were stable from the prior week.

Genscape Inc. estimated LNG feed gas demand of 10.14 Bcf/d for Monday’s gas day, a 176 MMcf/d day/day increase to start the week.

“Interstate pipeline feed gas nominations have averaged 9.40 Bcf/d over the past seven days,” Genscape analyst Allison Hurley said Monday. “Demand from facilities on the Gulf Coast accounted for 9.14 Bcf/d,” while the Cove Point and Elba Island LNG facilities “combined for the remaining 1 Bcf/d.”

Amid the shift in weather, analysts are anticipating a second consecutive withdrawal with this week’s Energy Information Administration (EIA) storage report. Bespoke, for one, models a 25 Bcf pull from gas stockpiles for the week ended Nov. 27.

Last week’s storage report marked a return to withdrawals. EIA reported a pull of 18 Bcf from natural gas storage for the week ended Nov. 20, driven by a substantial decrease in the East region. The agency had previously reported back-to-back injections after the first pull of autumn for the final full week of October.

The latest withdrawal decreased inventories to 3,940 Bcf, though storage was above the five-year average of 3,690 Bcf.

Beyond weather, traders continue to track the direction of the coronavirus pandemic and its potential impact on demand heading into winter. Several U.S. states and cities, as well as countries in Europe, have recently ordered new business activity restrictions to slow the spread of the virus.

While such restrictions could boost residential heating demand with more people at home this winter, they could simultaneously diminish commercial and industrial demand.

Meanwhile, up to three vaccines are set to hit the market late this year or early next.

The “vaccines are showing 90-plus percent effectiveness in warding off the virus,” said Jack Ablin, chief investment officer at Cresset Capital Management. “These vaccines share the same level of efficacy as the smallpox and measles vaccines, which were both medical breakthroughs.”

But he and others caution that it may take several months to widely distribute vaccines, leaving the domestic economy and markets overseas vulnerable to economic malaise this winter.

U.S. public health officials reported fewer virus cases on Sunday than the daily average of the prior week, though testing was lighter over the holiday weekend. The nation reported 138,903 new cases for Sunday, according to Johns Hopkins University, down from the record 205,557 reported on Friday.

Hospitalizations, however, hit another high on Sunday, with more than 93,000 people admitted to U.S. medical centers across the nation, according to the Covid Tracking Project.

Cash Clambers

Spot gas prices jumped on Monday across the Lower 48 as temperatures chilled and heating demand mounted.

“A weather system with rain and snow will track across the eastern U.S. the next few days with frosty lows of 10s to 30s and highs of 30s to 50s,” NatGasWeather said Monday. “Temperatures will also be cool across the South and Southeast with lows of 20s and 30s.”

A second cold shot is forecast to push into the interior West and central United States, with lows of zeroes to 30s Wednesday and Thursday, the forecaster said. While the eastern United States is expected to warm back into 50s and 60s later this week, “another weather system is expected into the Southeast and then rest of the East” this weekend and early next week “to keep regionally stronger demand going.”

In the Northeast, Transco Zone 6 NY surged $1.160 day/day to an average $2.590, while in the Southeast, Dominion Energy Cove Point cruised up $1.085 to $3.255.

Prices also spiked across the central United States. In West Texas, El Paso Permian prices shot up 57.0 cents to $2.705, while in the Midwest, prices at Defiance rose 46.0 cents to $2.585.

In the West, El Paso S. Mainline/N. Baja skyrocketed $1.385 to $3.970, and SoCal Border Avg. ascended $1.270 to $3.950.

“As expected, a major transition is occurring in the natural gas market. The ultra-warm weather in November (the third warmest in the past 70 years) is in the rearview mirror, with no signs it will return in the next week,” analysts at EBW said. “Instead, this week is starting with much cooler weather flooding much of the United States…Overall, temperatures are likely to average between 10- and 30-year norms, strengthening cash prices and reducing downside price risk.”