Natural gas futures slipped early on Monday following forecasts for mild weather and diminished heating demand. However, they rebounded in afternoon trading and finished in the green amid anticipation of a late-month surge in frigid temperatures.
The February Nymex gas futures contract settled at $2.747/MMBtu, up 4.7 cents day/day after falling more than 10 cents in morning trading. March gained 4.7 cents to $2.703.
With conditions mostly mild Monday, NGI’s Spot Gas National Avg. shed 3.5 cents to $2.745.
“The forecast continued its warming trend over the weekend, due to a couple of factors,” Bespoke Weather Services said. “One is that the nearer-term forecast, with no quality cold source anywhere in North America, rolled forward warmer. The other reason is that, once we do see a true cold source develop up in Canada, it looks to impact the less populated western U.S. rather than the eastern half, keeping national demand no better than near normal.”
Bespoke said it removed 15 gas-weighted degree days from its projections Monday compared to Friday’s forecast.
Major weather models, however, showed negative North Atlantic Oscillation “tendencies into late month” that could lead to cold in the West shifting eastward and driving more demand. This “keeps the medium-range pattern interesting,” the firm added.
National Weather Service meteorologists said a harsh winter chill could still blanket large swaths of the country near the end of January. They pointed to the potential for a polar vortex – a cold snap that develops in the atmosphere above the North Pole and sends harsh blasts of freezing temperatures throughout the Northern Hemisphere. This would drop temperatures in North America as well as Europe and Asia, key destinations for U.S. liquefied natural gas (LNG) exports.
LNG volumes, while steadily strong, dipped below 11 Bcf over the weekend and into Monday after hovering above that near-record threshold over several days last week, NGI data show.
Low temperatures are already hanging near zero or below in parts of Asia, fueling robust heating demand and need for U.S. gas. Should an intense winter chill wash over the Lower 48 as well later this month, analysts expect domestic heating demand to surge and cut quickly into U.S. stockpiles.
“Even with the bearish weekend model shift, the year/year storage surplus is still likely to largely evaporate this month,” EBW Analytics Group analysts said Monday.
The U.S. Energy Information Administration (EIA) reported a withdrawal of 130 Bcf for the week ended Jan. 1. The pull reduced inventories to 3,330 Bcf. Stockpiles, however, were still above the year-earlier level of 3,192 Bcf and above the five-year average of 3,129 Bcf.
Meanwhile, following the rioting at the Capitol building in Washington, DC, last week that left five people dead, House Democrats on Monday introduced an article of impeachment against President Trump. The lawmakers accused the Republican president of inciting an arms insurrection. House leadership scheduled a vote for Tuesday on a measure that would implore Vice President Pence to invoke the 25th Amendment to the Constitution to strip Trump of his powers within 24 hours. Failing that, Democrats plan to move ahead with the impeachment process.
The push in Congress comes on the heels of several Fortune 500 chief executives and major trade groups across industries calling on Pence and the Cabinet to trigger the 25th Amendment.
National Association of Manufacturers (NAM) CEO Jay Timmons, for one, said Trump “incited violence in an attempt to retain power, and any elected leader defending him is violating their oath to the Constitution and rejecting democracy in favor of anarchy.”
Stock markets and oil prices also dropped Monday, with analysts pointing to the uncertainty imposed by the chaos on Washington.
Stifel Financial Group’s Brian Gardner, chief Washington policy strategist, said markets would soon focus on another coronavirus relief bill that President-elect Biden vowed to pursue. Amid the tumult, Gardner said such legislation is “not a given” and negotiations could drag out over months, disappointing markets.
Cash prices declined across the country on Monday as temperatures climbed over most of the Lower 48.
“This abnormal warmth is expected to peak during the middle of this week with population-weighted heating degree days forecast to reach their low this week at 22 on Thursday,” Wood Mackenzie analyst Matt McDowell said.
He noted, however, the shift in the polar vortex and an anticipated return to winter norms beginning next week could prove a catalyst for prices later in January.
Amid the current mild conditions, though, next-day prices fell in most regions of the country.
In the Midcontinent, OGT fell 5.5 cents to $2.555, and out West, Malin declined 10.5 cents to $2.650.An exception on Monday was the Northeast, where temperatures hovered near the freezing mark and prices advanced. Algonquin Citygate rose 18.5 cents to $4.045.
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