Coming off a stretch of wild volatility, natural gas futures extended their recent losses in early trading Friday as forecasts hinted that cold might fade at the end of the month. The February Nymex contract was down 8.6 cents to $4.184/MMBtu at around 8:55 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

Bespoke Weather Services characterized the recent tumble in natural gas futures as a “mysterious freefall,” one not justified by any changes in forecasts.

As of early Friday the European model had shown a “shift toward less intense cold in the medium range” over the previous 24 hours, the firm said.

“The forecast remains solidly cold, though the ends of the runs do show a distinct lessening in intensity,” Bespoke said. However, updated forecasts still featured “Alaskan ridging as well as some attempt to push some ridging into Greenland, both generally colder signals.”

Bespoke said shifts in the weather outlook “have been too minor” to explain the recent price action, which included a dramatic 60.8-cent rally on Wednesday and a subsequent sell-off Thursday of similar magnitude. 

This suggests recent moves have been “more about positioning and a big market squeeze back on Wednesday,” the firm said.

Meanwhile, the Energy Information Administration on Thursday reported a hefty 179 Bcf withdrawal from U.S. storage facilities during the week ended Jan. 7, a print in line with estimates.

The withdrawal left stockpiles at 3,016 Bcf for the period, 2.4% higher than the five-year average but down 6.2% from year-earlier levels.

The latest withdrawal indicates a tight underlying supply/demand balance during the report week, according to Wood Mackenzie analyst Eric Fell.

“Compared to degree days and normal seasonality, a 179 Bcf withdrawal appears tight by 2.8 Bcf/d versus the prior five-year average for New Year’s week,” Fell said.

Analysts at Tudor, Pickering, Holt & Co. (TPH) noted that the print “did little to drive further market enthusiasm” Thursday as the February contract was already coming off a huge rally a day earlier.

“On a weather-adjusted basis, we estimate the market was more than 4 Bcf/d undersupplied for the week (after a more than 4 Bcf/d oversupply the week prior), with supply trending materially lower week/week as demand picked up,” the TPH analysts said.

The firm estimated a 14 Bcf/d week/week increase in residential/commercial demand, or 1.95 Bcf/d above the five-year average.

“On the supply front, investor questions have focused on the degree of freeze-offs in recent trends as supply has remained muted to kick off the year in the 93-94.5 Bcf/d range after” sustaining “eye-catching” output above 97 Bcf/d in late 2021, the TPH analysts said.

Associated gas output has fallen off by around 1 Bcf/d from late December peaks, including declines of 0.2 Bcf/d and 0.3 Bcf/d from the Bakken Shale and Permian Basin, respectively, according to the firm.

The Northeast remains “the largest component of the trend lower in volumes, down more than 2 Bcf/d since late December peak levels in the 35.5 Bcf/d range,” the analysts said.