While energy markets were still reeling from the unprecedented conditions driving physical natural gas prices into the hundreds of dollars per MMBtu at hubs all over the country, futures price action appeared markedly more calm early Wednesday. 

NGI Morning Natural Gas Price & Markets Coverage

After locking in a 21.7-cent gain in the previous settle, the March Nymex contract was trading 3.0 cents higher at $3.159/MMBtu at around 8:40 a.m. ET.

It was a historic day in the natural gas spot market Tuesday, with NGI’s Daily Gas Price Index recording previously unheard of day-ahead prices as high as $999.00 amid extreme cold plunging deep into the Lower 48.

“Pipelines are still reeling from the cold,” analysts at Wood Mackenzie said in a note to clients early Wednesday. They noted numerous operational flow orders and forces majeure issued in recent days.

Production has also “dropped precipitously” amid the cold weather, according to the firm.

Lower 48 production dropped below 75 Bcf/d as of Monday after revisions, “which is a level not seen since January 2018,” Wood Mackenzie analysts said. “For perspective, Lower 48 production was coming in above 90 Bcf/d just 10 days ago on Feb. 5.”

It’s likely not all of these declines are due to freeze-offs, according to the firm.

“There could be a fair amount of gas in the Permian Basin and on intrastate pipelines being delivered directly to meet local demand rather than showing up as production in our models,” the analysts said.

EBW Analytics Group analysts noted that “massive power outages” and losses in industrial and liquefied natural gas (LNG) feed gas demand have been mitigating the effects of the steep declines in production.

“Natural gas remains subject to strongly conflicting forces,” the EBW analysts said. The Energy Information Administration (EIA) “is expected to report huge draws this week and next. Restoring production will take time, and LNG exports and industrial demand will start to rebound soon.”

EIA’s report Thursday could trigger a test of resistance at $3.20 for the March contract, according to EBW.

“Weather-driven demand, though, will soon plunge, declining 40-45 Bcf/d by a week from today,” the EBW analysts said. “Cash prices are likely to moderate soon, potentially pushing down futures. The key will be how long it takes to restore production — which is not likely to occur quickly.”

Looking ahead to Thursday’s EIA storage report, NGI’s model predicted a 286 Bcf withdrawal for the week ended Feb. 12, more than twice the magnitude of the 141 Bcf pull recorded for the year-ago period and the five-year average 142 Bcf withdrawal.

March crude oil futures were up 82 cents to $60.87/bbl at around 8:40 a.m. ET, while March RBOB gasoline was up about 3.8 cents to $1.8107/gal.