Natural gas prices faltered on Tuesday even as domestic forecasts showed robust near-term heating demand and as producers curtailed output amid freezing conditions. The February Nymex gas futures contract shed 9.8 cents day/day and settled at $3.717/MMBtu. March fell 9.6 cents to $3.582.

Northeast Prices

At A Glance:

  • EIA posts 58 Bcf withdrawal
  • Late March looking cold
  • Production stays strong

NGI’s Spot Gas National Avg. fell 30.0 cents to $4.295 as prices in the volatile Northeast dropped following a blast of snow that walloped the region a day earlier. Prices jumped Monday but pulled back after the winter storm eased.

Still, forecasters look for renewed demand in the days ahead.

“After large warmer changes Sunday afternoon into Sunday night, weather models have progressively been moving back colder,” Bespoke Weather Services said Tuesday, looking through to mid-January.

Frost temperatures that permeated the Midwest, East and parts of the southern United States early this week were expected to linger and extend into next week, driving the strongest stretch of national heating demand so far this winter, the firm said.

However, weather outlooks were volatile late in 2021 and remain so early this year, Bespoke added. This is giving traders reason to be dubious about driving up prices further after an 8.5-cent gain on Monday to kick off the new year.

Still, Bespoke noted that initial estimates on Tuesday showed production hovering below 92 Bcf, down more than 1 Bcf from the prior day and far below the late 2021 highs around 97 Bcf/d. Freeze-offs in the Permian Basin were a suspected culprit, and the firm said similar weather-driven curtailments may lie ahead this month, providing price support.

EBW Analytics Group senior analyst Eli Rubin agreed. The “potential for notable production losses to start January still does not appear fully priced into the market,” he said Tuesday.

Export Demand Interrupted

Rubin also noted that, while European demand for U.S. exports of liquefied natural gas (LNG) is robust and expected to remain so through the winter, harsh weather conditions have also interfered with LNG loading schedules this week, causing some concern. Additionally, he said, deliveries to Cheniere Energy Inc.’s Sabine Pass LNG facility on the Gulf of Mexico are lower than previously anticipated to start the year as a new train there has yet to enter commercial service.

While the seven-day moving average for LNG feed gas volumes had slipped below 12.0 Bcf/d early Tuesday, “we anticipate a rebound towards full utilization above 13.0 Bcf/d into mid-January,” Rubin said, as weather permits and capacity increases.

In another potential positive for global demand, European Union authorities said they were considering a draft proposal that defines natural gas along with nuclear energy as “sustainable” investments. This could solidify natural gas as a key, multi-year bridge to an eventual future of dependence on renewable energy sources.

The “climate-forward European classification of natural gas as a green investment could help ease political pressure on natural gas in other jurisdictions around the world,” Rubin said.

Meanwhile, analysts this week said the highly contagious Omicron variant of the coronavirus looms as a potential wild card over stock and commodity markets, including natural gas. The United States reported a daily record 1.08 million coronavirus infections on Monday.

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To date, however, markets are shrugging off concerns about Omicron forcing new lockdowns that would curb economic momentum and slow energy demand.

“All eyes remain on the Omicron variant spread, though indications continue to come in overall better than feared. The virus has been highly transmissible, but relatively mild so far,” said Raymond James & Associates Inc.’s Mike Gibbs, managing director. “We are also encouraged by peaking cases in South Africa, roughly one month from the surge’s onset. While the situation remains very fluid, we are optimistic that the global reopening can progress over the coming months as Covid concerns subside.”

Spot Prices Mixed

Cash prices varied by region but were ultimately dragged lower by hubs in the Northeast that posted strong gains Monday and then retreated Tuesday.

Algonquin Citygate fell $3.630 day/day to average $6.940, while PNGTS lost $2.285 to $7.670 and Tenn Zone 6 200L shed $2.745 to $6.935.

Demand and prices were elevated elsewhere, however, as National Weather Service data showed that freezing temperatures permeated large swaths of the Lower 48, from Chicago to Washington, DC, with overnight lows in the 30s projected as far south as Texas.

Additionally, in the Northern Plains and Upper Midwest, single-digit lows early this week were expected to drop even further by Thursday, with temperatures forecast to plunge to nearly 20 below zero in Minneapolis.

Against that backdrop, Chicago Citygate gained 40.5 cents to $3.870 and Lebanon advanced 45.5 cents to $3.790. In Texas, El Paso Permian rose 25.5 cents to $3.640.

Heating demand could further intensify as soon as Wednesday.

A new storm “is expected to take a snowy swing at the Midwest and Great Lakes this week, and it could precede an even bigger storm system in the Northeast,” AccuWeather said.

“A quick-hitting storm will march from the northern Plains into the Upper Midwest and Great Lakes through Wednesday evening, bringing along a swath of powdery snow and blustery conditions,” said AccuWeather Meteorologist Brandon Buckingham. “Cold and blustery conditions are in store behind this storm.”

After pushing through the Great Lakes, AccuWeather said, this storm “will set the stage for an even larger storm in the Northeast by drawing fresh, cold air into the region.”