Despite favorable weather news, natural gas futures traded sideways Monday as worries mounted over a still-surging coronavirus pandemic and its potential impacts on economies and energy demand.

Markets

The January Nymex contract settled at $2.705/MMBtu, up a half-cent day/day. February ticked up eight-tenths of a cent to $2.689.

NGI’s Spot Gas National Avg., meanwhile, declined 19.5 cents to $2.815 amid a warm weather start to the week.

NatGasWeather said that while major models swayed back and forth between milder and colder trends over the weekend and into Monday, the American Global Forecast System ultimately settled on a colder outlook beginning around the Christmas holiday and continuing into early January.

“There’s still light demand to trudge through the next three days, but after the pattern is much better than it’s been all winter and likely finally cold enough for a bullish lean,” the firm said.  

Headwinds formed elsewhere, however. Liquefied natural gas (LNG) levels, a catalyst for futures much of December, started the week on a weaker note. NatGasWeather said its estimates for LNG feed gas demand fell over the weekend to around 10.2-10.5 Bcf/d, off around 1 Bcf/d from recent highs. NGI data showed volumes hovering around 10.5 Bcf/d Monday.

At the same time, despite a second vaccine being made available this week in the United States, the pandemic continues to surge across the Lower 48, raising concerns about commercial and industrial energy demand.

The pandemic also is intensifying overseas, with Great Britain reporting a new strain of the virus and imposing new economic restrictions to curb outbreaks. Several European countries and Canada barred travelers from Britain in hopes of keeping at bay the newly discovered and highly infectious variant of coronavirus that is surging in London.

The new strain threatened to throw a wrench into the global economic recovery as well as a rebound in energy demand. Gas futures fell early in the trading day alongside oil prices and major stock indexes in the United States and Europe.

Downward pressure on gas prices early Monday was likely “due to a sell-off in equities and oil triggered by new Covid-19 lockdowns in Europe and fears regarding virus mutations,” EBW Analytics Group said.

Concerns about the new virus development also eclipsed a deal reached by lawmakers in Washington, DC, that would provide a new stimulus to the domestic economy. The $900 billion aid package would send direct payments to most residents, extend special unemployment benefits and provide assistance to small businesses.

Traders are expected to soon turn their attention to this week’s Energy Information Administration (EIA) storage report, which will be delivered a day earlier than normal – on Wednesday – due to Christmas Eve landing on Thursday. It will cover the week ended Dec. 18.

Early forecasts pointed to a large withdrawal because of a major storm that dropped more than a foot of snow in several eastern states during the covered week. Winter conditions drove strong heating demand in the Northeast, where cash prices climbed four consecutive days.

NatgasWeather said the pull may far exceed the five-year average withdrawal of 127 Bcf for the comparable week.

EIA reported a 122 Bcf withdrawal from inventories for the week ending Dec. 11, slightly above the median estimates found in major polls. The latest EIA figure compared with the 97 Bcf decrease in storage in the comparable period a year earlier and a five-year average pull of 105 Bcf.

Total working gas in storage as of Dec. 11 stood at 3,726 Bcf, 284 Bcf higher than year-ago levels and 243 Bcf above the five-year average, the agency said.

Cash Called Lower

Spot gas prices fell on Monday as temperatures warmed in the Midwest and into the East, diminishing near-term heating needs.

“National demand will be light the next several days as warmer than normal conditions rule most of the United States,” with highs of 30s to 50s across northern regions and 60s and 70s across southern areas of the Lower 48, NatGasWeather said.

“There will still be weather systems with showers and local cooling over the Northwest and Mid-Atlantic Coast, just with limited cold air,” the firm added. Nevertheless, national demand could “spike” Thursday through Saturday “as a frigid cold shot pushes into the Midwest and eastern half of the United States, with frosty lows” ranging from subzero to the 20s over large portions of the country.

On Monday, plunging prices in the Northeast led the national decline. Over the previous week, prices surged as the huge snowstorm whacked major markets such as Philadelphia, New York and Boston. But after the storm exited last Thursday and temperatures climbed early this week, demand dropped, and prices sunk in tandem.

Algonquin Citygate lost $3.085 day/day to an average $4.105, while Tenn Zone 6 200L North dropped $2.820 to $4.755, and PNGTS shed $1.820 cents to $5.820.

Elsewhere, prices were generally up or down only a few cents. In the Midwest, Chicago Citygate fell 8.0 cents to $2.490, while in the Rocky Mountains, Kingsgate gained 6.0 cents to $2.955.

Out West, meanwhile, SoCal Citygate prices advanced 16.0 cents to $4.455.

Genscape Inc. noted that last week “featured sustained colder temperatures and high demand in Southern California for the second time this season, following the first major burst of cold weather there in early November.”

Winter-to-date, the firm said, SoCal Citygate basis prices are running “slightly above” the corresponding five-year average.

“That said, simply using the five-year average basis price masks large differences from year to year,” Genscape said. “2015 and 2016 winter-to-date both featured average SoCal Citygate basis prices well under $1 – at 40 cents and 12 cents – while 2017-2019 all were well above $1. The year with the highest average, 2018, saw Citygate come in at $3.73.

“This winter is running slightly colder than the average of the past five for the southern Golden State, mostly driven by the early November cold snap,” the firm added. “It featured population-weighted heating degree days more consistent with late December.”