Natural gas futures on Friday rallied for the fourth time in the week’s five trading sessions, lifted by ongoing robust levels of U.S. exports and expectations for stronger weather-driven demand in coming weeks. The December Nymex contract gained 16.3 cents day/day and settled at $5.065/MMBtu. January rose 15.0 cents to $5.145.

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At A Glance:

  • Futures fly as export volumes climb
  • European demand for U.S. LNG strengthens
  • Cash prices retreat in West

NGI’s Spot Gas National Avg., however, shed 7.5 cents to $4.880 as temperatures climbed and prices dropped in the West.

While forecasts have wobbled from day to day this month, Bespoke Weather Services said Friday the European model “showed a much more threatening look for potential cold toward the end of the run in early December.”

The firm cautioned, however, that the European model “has been most guilty in recent weeks of hinting at bigger cold patterns that have not materialized” and volatility in both forecasts and natural gas prices likely lies ahead. “We need more consistency before being able to build a more confident case.”

That noted, long-range outlooks do call for steadily colder weather across the northern United States in December.

Additionally, mid-range forecasts point to freezing conditions over large swaths of Europe late this month and early into the next. This comes at a time when countries across the continent are low on gas in storage and paying a premium to import U.S. liquefied natural gas (LNG).   

LNG feed gas volumes hovered close to 2021 highs around 11 Bcf throughout the past week after reaching a near-record level of 12 Bcf earlier this month. NGI’s estimate showed feed gas volumes again eclipsing the 12 Bcf threshold early Friday. Elevated LNG levels are widely expected to continue through the winter, providing support for Henry Hub prices.

EBW Analytics Group said amid the maintenance projects, LNG volumes have fluctuated this fall. Still, with work culminating at key locations in the Gulf of Mexico, the seven-day moving average as of Friday “illustrates a clear pattern of steadily increasing demand into early winter. Further demand gains are ahead” and “new daily demand records north of 12.25 Bcf/d are possible” in the coming week.   

The pandemic, however, remains a wildcard globally and in Europe in particular, the EBW analysts added. “Coronavirus outbreaks are popping up across the northern hemisphere as colder winter weather descends,” the analysts said.

“Austria announced a nationwide 20-day lock-down beginning Monday; Germany is experiencing a rapidly escalating wave of new infections; and the seven-day moving average of U.S. cases is up by 33% over the past two weeks,” the EBW team added. “The potential for slowing economic activity as the pandemic threat lingers presents another headwind for bulls across the oil, gas, and electricity sectors this winter.”

Are U.S. Gas Storage Withdrawals Expected?

Meanwhile, analysts continued to mull the significance of a late-season domestic storage increase.

The Energy Information Administration (EIA) on Thursday reported a 26 Bcf injection into Lower 48 gas stocks for the week ended Nov. 12. The build was in line with expectations and lifted stockpiles to 3,644 Bcf overall, though inventories were still about 2% shy of the five-year average of 3,725 Bcf.

“The 26 Bcf build follows a tight start to November, with a 7 Bcf build the week prior,” analysts at Tudor, Pickering, Holt & Co. (TPH) noted. “The key moving pieces week/week were seasonally warmer temperatures (residential/commercial demand was down 3 Bcf/d week/week) and weaker power generation demand (down 2.5 Bcf/d week/week) as wind picked up the pace and nuclear generation continued to bounce back from shoulder season maintenance.”

While winter weather has gotten off to a “slow start,” LNG exports have provided “solid support” to the market, according to the TPH analysts.  

With the combination of LNG demand and gradually colder weather, withdrawals from storage lie ahead.

For next week’s EIA print, the TPH analysts said preliminary modeling suggested a 28 Bcf withdrawal. Residential/commercial demand is set to increase 5 Bcf/d week/week to around 28 Bcf/d, though week-to-date demand has still lagged the five-year average by roughly 2.2 Bcf/d, the firm said Friday.

Spot Prices Stumble

Cash prices cascaded on Friday, dragged lower by steep declines in the West, where mild weather developed during the day and was expected to last through the weekend.

SoCal Citygate dropped $1.275 day/day to average $5.500, while SoCal Border Avg. shed 41.0 cents to $5.080 and PG&E Citygate lost 26.5 cents to $6.095.

A wintry blast of chilly temperatures and rain permeated the Northeast on Friday, with forecasts calling for overnight lows of 20s to 30s, according to National Weather Service data.

This did galvanize demand and higher prices at select hubs. Tenn Zone 6 200L, for one, gained 69.0 cents to $5.750.

Much of the rest of the country enjoyed mild temperatures Friday, but that was expected to change early in the week ahead. A weather system with rain and snow was projected to move across the northern United States, delivering freezing conditions to the Midwest early and then another bout of cold and rain to the Northeast.

“Higher physical demand may coincide with rising heating-degree days… potentially creating a bullish spot market catalyst,” the EBW analysts said.

Ahead of the next wave of weather, Chicago Citygate ticked up a half-cent to $4.815.

AccuWeather said Wednesday – the day before Thanksgiving – could prove the harshest day of the week, with both snow and thunderstorms possible in the heavily populated Northeast.

“Several cities will face disruptive weather that could add stress for millions taking to the skies and highways” for the holiday, the forecaster said. Severe conditions, including wind gusts in excess of 40 mph, could impact major travel hubs and long stretches of interstates from New York City through Boston.

“We could be looking at a huge mess and a real wrench in holiday travel,” AccuWeather chief meteorologist Jon Porter said.