Natural gas futures staged a stunning recovery Monday as one of the major weather models added a huge chunk of demand to the late-February forecast. The March Nymex gas futures contract settled on the higher end of its trading range at $4.195/MMBtu, up 25.4 cents from Friday’s close. April jumped 22.5 cents to $4.160.

storage graph

At A Glance:

  • Weekend forecast mild
  • Storage surpluses to grow
  • West Coast cash climbs

Spot gas prices also strengthened as frigid temperatures continued to drive up heating demand across the eastern United States. NGI’s Spot Gas National Avg. climbed $1.040 cents to $5.670.

The latest cold blast that hit the eastern United States this weekend is already its nearing its end, with temperatures set to rise by midweek ahead of another winter storm. It’s this weather system that sent the gas market into a tizzy on Monday as models disagreed on how long the chill would linger.

NatGasWeather said the European model gained 17 heating degree days for the 15-day outlook, keeping the cold air around for the last week of February. The Global Forecast System (GFS), however, maintained through subsequent runs a “rather warm and bearish” set-up for Feb. 21-28.

Bespoke Weather Services said the bias of the pattern is to the side of below-normal demand given the latest changes in the modeling. However, “it has less impact here, especially with production around 95 Bcf.”

Nevertheless, the mere potential for cold to stick around into March appears to have caused a few jitters in the market since the next government inventory report could show inventories taking another large step down. The Energy Information Administration (EIA) is scheduled to release the next weekly storage report on Thursday and though another 200-plus Bcf withdrawal is unlikely, the draw is all but certain to blow past historical levels.

NGI is modeling a 189 Bcf pull from stocks for the week ending Feb. 11. For comparison, a 227 Bcf withdrawal was recorded in the same period last year, and the five-year average draw is 154 Bcf.

Total working gas in storage as of Feb. 4 stood at 2,101 Bcf, which is 222 Bcf below year-earlier levels and 215 Bcf below the five-year average, according to EIA.

Will Downside Win Out?

Given the uncertainty in the forecast, bears may have to wait a bit longer to test $3.75 in prompt-month pricing, according to Bespoke. “But it’s tough to justify a lot of upside risk unless we see additional significant colder changes. As such, its best guess is a choppy market over the next few days,” it said.

Bespoke and NatGasWeather also noted that geopolitical tensions between Russia and Ukraine would be closely monitored, but should not be a major issue when it comes to Henry Hub pricing.

German Chancellor Olaf Scholz was scheduled to meet Russian President Vladimir Putin on Tuesday. Bloomberg reported that Scholz expects clear steps from Russia to de-escalate the conflict with Ukraine. Spot liquefied natural gas (LNG) prices in Asia followed European natural gas benchmarks higher Monday as concerns over supply disruptions continued.

In the Lower 48, LNG feed gas demand continued to run rampant. After averaging under 12.5 Bcf/d for the past three weeks, LNG feed gas demand surged north of 13.0 Bcf/d over the weekend as the Calcasieu Pass LNG export facility was ramping up toward full capacity.

EBW Analytics Group senior analyst Eli Rubin said higher Gulf Coast spot demand could help provide needed support for Nymex futures as weather fades seasonally. That said, there remained “little fundamental justification” for the March contract to trade at a premium to the April contract.

“Unless weather continues to shift in a bullish direction, renewed downward pressure is likely within the next seven to 10 days,” Rubin said.

Cash Rallies

Spot gas prices were higher across the board as the past weekend’s winter blast sent temperatures plummeting and heating demand surging. Northeast locations tacked on several dollars once again, with prices in several areas moving past $20 for Tuesday’s gas day.

Algonquin Citygate jumped $7.925 to average $22.475, while PNGTS rose $7.875 to $23.310. Transco Zone 6 NY was up only 35.0 cents to $7.000.

In Appalachia, Texas Eastern M-3, Delivery shot up 80.5 cents to $6.415, and in the Southeast, Florida Gas Zone 3 tacked on 10.0 cents to hit $4.180.

On the pipeline front, Sabal Trail Transmission began a series of maintenance events on Monday on the Alexander City compressor station in Tallapoosa, AL. The biggest impact on flows was to occur on Thursday’s gas day (Feb. 17) since operational capacity is set to be reduced to 558,000 MMBtu/d because of a full station outage. This could equate to 296,000 MMBtu/d, but it is more likely to be around 143,285 MMBtu/d, according to Wood Mackenzie analyst Kara Ozgen.

“In the last 30 days, Alexander City maxed at 980,000 MMBtu/d and averaged 716,600 MMBtu/d,” she said.

Prices on the West Coast also strengthened as the region – fresh off a record-setting high temperature week – is gearing up for a blast of cold weather to return.

Temperatures across much of California, Nevada and Arizona peaked over the weekend, soaring to 15-20 degrees above normal for mid-February, according to AccuWeather. This warmth had been thanks to a northward bulge in the jet stream, which created a dome of warm air over the region, promoting dry weather.

“On Monday and Tuesday, the jet stream will gradually lunge southward and allow much colder air to flow back across the western United States,” said senior meteorologist Alex Sosnowski.

Malin next-day gas climbed 21.5 cents to $3.790, and SoCal Citygate edged up 14.5 cents to $3.945.