Natural gas futures tumbled more than 20 cents lower in post-Christmas trading as weather data “failed miserably” over the weekend, shedding a hefty amount of demand from the 15-day outlook. 

Markets

With any opportunity for truly cold weather not expected before the middle of next month, the January Nymex gas futures contract settled Monday at $2.305/MMBtu, down 21.3 cents from last Thursday’s close. February plunged 18.6 cents to $2.326.

Spot gas prices also tumbled, with widespread losses of 30.0 cents or more seen across the United States. NGI’s Spot Gas National Avg. fell 24.5 cents to $2.535.

With the European weather data erasing more than 25 heating degree days from the long-range outlook, and the American model also backing off the projected demand in the early part of January, natural gas traders wasted no time in taking a hatchet to prices. The January Nymex contract opened Monday’s session at $2.311 and traded in a roughly 10.0-cent range before ultimately settling very close to where it started.

After trending milder with several consecutive runs right before the Christmas holiday, the weekend weather data trended further milder, according to NatGasWeather. The Global Forecast System (GFS) lost 12 heating degree days (HDD), while the European model lost a heftier 25-plus HDDs. The midday GFS failed to add any “meaningful” demand, the forecaster said, with modest bouts of cooling into the United States over the next week but without widespread frigid cold.

“What makes the coming pattern strongly bearish is the eight- to 15-day period favors mild conditions over most of the U.S. with continued only minor bouts of subfreezing temperatures into the northern U.S.,” NatGasWeather said.

The firm expects the period is now “too bearish” and will likely add demand in time, “although it would need to be a hefty amount” in order to flip bearish weather sentiment to bullish, which isn’t expected. “We continue to look to Jan. 10-13 as the next best opportunity for more impressive/widespread cold.”

Bespoke Weather Services said until the warmer momentum halts, it is difficult to say where a price bottom may be. There is still a healthy block expected to form by the middle third of January, aided by a strong warming in the polar stratosphere, according to the forecaster. However, the Pacific flow needs to slow down for this to send temperatures materially colder.

“That is something that may happen in the back half of the month, enough to at least bring back some variability, but confidence is lower after seeing such a huge model bust over the last several days,” Bespoke said.

The firm doesn’t see much risk/reward in being bearish, though it advised caution until the market clears the January contract’s expiration on Tuesday, as well as the holiday period, so that it can see how balances shape up once clear of any holiday impact.

“It is worth noting that both Europe and Asia are seeing cold,” which should keep high liquefied natural gas (LNG) volumes in play for the foreseeable future, Bespoke said. “This low price environment should give power burns a boost as well into the new year.”

On the LNG front, Dutch Title Transfer Facility prices traded near two-year highs after the Christmas holiday on colder weather and optimism over a Brexit deal in which terms were finally reached over trade and other issues for the UK to leave the European Union. Meanwhile, North Asia spot prices for February delivery remained above $13.00 on cold weather and a supply crunch.

On a more macro level, the Covid-19 pandemic continues to be a wildcard in 2021, even with two vaccines now available in the United States and a handful of others approved in other countries. Raymond James & Associates Inc. said Covid-19 lockdowns are to remain “a fact of life” well into the new year. As things stand, the firm’s global reopening tracker is slightly off its November lows but still shows 657 million people facing mandatory business closures of varying degrees of stringency.

Once spring arrives, the pace of vaccination is expected to accelerate, according to Raymond James, but there are still hurdles ahead. This is especially the case, though not exclusively, in lower-income countries. “Given the importance of emerging markets for oil demand, full-fledged demand recovery is shaping up to be a 2022 story, with the 2021 exit rate getting close but not quite at pre-Covid levels.”

For now, it appears that more people ventured out for the Christmas holiday, with Tudor, Pickering, Holt & Co. (TPH) analysts reporting that global TomTom rush-hour congestion soared to new pandemic highs, rising 5% week/week to 62%. Average December congestion at 56% is tracking well above November at 52%. Overall, global congestion is tracking 11% lower year/year.

TPH said U.S. TomTom rush-hour congestion popped 2% week/week to 34%, continuing to set new pandemic highs. Average December congestion at 29% is tracking well above November at 26%, the biggest month/month increase since July.

“The weekly uptick was primarily driven by strength in New York (63% from 45%) and Chicago (45% from 24%) ahead of the holiday weekend,” the TPH team said.

Other notable risers were San Francisco and Washington, but these were partially offset by decreases in Philadelphia (35% from 107%) and Detroit (17% from 43%), which returned to more normalized levels following the prior week’s weather driven surge. Overall, U.S. congestion is tracking 25% lower year/year, with no cities above 2019 levels.

Steep Discounts

Spot gas prices were sharply lower after the Christmas break, with a steady stream of weather systems not expected to incite much demand in the Lower 48.

NatGasWeather said only the weather system currently sweeping across the Great Lakes and interior Northeast would arrive with enough cold air to drive strong national demand. A chilly system is forecast to impact the interior West into the Plains, although the cold air was seen fizzling by the time it pushes into the eastern half of the United States late in the week.

“Additional systems will follow next weekend through the first week of January. However, they just won’t tap any truly frigid northern latitude air for only locally cool versus normal conditions,” NatGasWeather said. “There will also be warm breaks between systems to prevent the coming pattern from being as cold as needed to satisfy.”

The lackluster late-December demand outlook sent cash prices tumbling on Monday. The Northeast led with nearly $1.00 losses seen at several points in the region. Transco Zone 6 non-NY cash was down 94.5 cents to $2.340.

Appalachia prices posted losses in the 20.0-30.0-cent range, as did most market hubs in the Southeast. One exception was Dominion Energy Cove Point, which plunged $1.750 to average $2.400.

Texas Eastern Transmission has indicated that it has restored full capacity to its 30-inch diameter system, lifting the forces majeure declared because of the Danville and Owingsville explosions. The 30-inch system was not expected to be brought back into service until 1Q2020 because of ongoing hard spot remediation, but that was revised around mid-December, according to Genscape Inc.

From Dec. 24 to Jan. 3, full capacity is online on the 30-inch system, with roughly 2.2 Bcf/d available through Berne and 2.0 Bcf/d through Danville and Owingsville. Tetco is scheduled to begin a series of maintenance events along the 30-inch System beginning on Jan. 4 that would restrict capacity along by up to 240 MMcf/d through at least Feb. 12.

Elsewhere across the country, benchmark Henry Hub fell 26.5 cents to $2.330. In the Midcontinent, OGT dropped 41.5 cents to $2.070.

Chicago Citygate was down 31.0 cents to $2.170, similar to decreases seen in Texas.

Western markets were generally stronger, with notable gains of more than 30.0 cents in some areas. The SoCal Border Avg. jumped 31.0 cents to $3.525.