Natural gas forward prices escalated across the Lower 48 throughout the Feb. 23-March 1 period, with a continuation of winter storms fueling sharp premiums on the West Coast, according to NGI’s Forward Look.

Fixed prices remain low overall as benchmark Henry Hub stood Wednesday at $2.819/MMBtu for April. That has prompted some power generators to make the switch to natural gas from coal to meet electricity demand. Freeport LNG also continues to take in more deliveries of gas to feed its liquefied natural gas terminal. In addition, some technical momentum has come into play in recent days.

Still, it’s harsh late-season cold, continued pipeline constraints, years of underinvestment in infrastructure and lagging West Coast storage inventories that helped propel April prices in California to more than double Louisiana’s Henry Hub.

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As of Wednesday, PG&E Citygate’s April contract stood at $7.008, up $1.220 through the period, Forward Look data showed. Prices remained strong across the curve, with the full summer strip (April-October) climbing $1.170 to $7.110. The winter 2023-2024 strip was edging up 98.0 cents to $8.008.

For comparison, the majority of U.S. locations put up price gains of less than 50 cents at the front of the forward curve and smaller increases further out, Forward Look data showed. Prices were seen mostly in the $3.00-4.00 range.

Unlike the rest of the country, though, the West Coast has received the lion’s share of bitter winter weather, with more on the way. Forecasters said snow, ice and strong winds continued to hammer the state on Thursday, with nearly 100,000 customers without power. National parks closed, classes canceled and ski resorts were shuttered because of too much white powder.

Though a brief break from the whiteout conditions was expected at the end of the workweek, snow was forecast to return over the weekend. This week’s winter blast is the latest in a series of storms that has pummeled the region, leading to a sharp downturn in region storage inventories as demand and prices have skyrocketed.

The Energy Information Administration (EIA) said Thursday stocks in the Pacific were down another 9 Bcf to only 99 Bcf as of Feb. 24. This is 166 Bcf below year-ago levels and 176 Bcf below the five-year average.

To put this into perspective, the South Central region, which is home of the vast majority of LNG exports, hit a surplus of 625 Bcf above year-ago levels and 660 Bcf above the five-year average as of Feb. 24.

Management for Pacific Gas & Electric Corp., which reclassified 51 Bcf to base gas versus working gas in 2021, discussed the record prices this winter and the impact on customers. CEO Patricia Poppe said during a quarterly call with investors the San Francisco-based company is “laser focused on affordability” and examining customers’ bills.

“We have a lot of opportunities to eliminate waste, improve our customers’ experience, make our system cleaner and more resilient, all the while reducing costs,” she said.

Stronger forward prices also were seen in Southern California, the Desert Southwest and throughout the Rockies.

SoCal Citygate April prices rose 75.0 cents through the week to hit $5.333, according to Forward Look. The summer picked up 68.0 cents to average $6.310, while the winter 2023-2024 tacked on 96.0 cents to average $8.685.

Northwest Rockies April moved up 56.0 cents to $3.339, and the summer rose 45.0 cents to average $3.320. The winter 2023-2024 strip averaged 69.0 cents higher through the period to reach $6.633.

Is The Futures Rally Over?

Though not as substantial as those on the West Coast, the rest of the Lower 48 posted price increases that were more in line with recent changes along the Nymex futures curve.

After six days in the black, futures started to peter out on Thursday amid a warmer change in the weather models.

NatGasWeather said there were large differences between the Global Forecast System (GFS) and European Centre (EC) models, with the latter colder for the March 8-15 period by a whopping 15-20 heating degree days. The gap had closed slightly as both models warmed a bit, but a significant difference remained.

Longer-range weather maps continue to maintain a rather chilly U.S. pattern March 15-25, according to NatGasWeather. However, the forecaster noted that colder-than-normal temperatures in March don’t carry the same weight as in January and February.

“In addition, in most instances this winter, colder long-range weather maps have ultimately ended up trending warmer in time,” NatGasWeather said. “That’s the primary risk ahead of and over the weekend break.”

Although the late-March outlook remains unclear, the upcoming cold snap may put an end to the streak of below-average storage withdrawals outside of the West.

The EIA reported another smaller-than-normal net draw in Thursday’s report. The agency said total stocks slipped by 81 Bcf, bringing inventories down to 2,114 Bcf. This is 451 Bcf higher than last year at this time and 342 Bcf above the five-year average.

By region, the Midwest and East led with pulls of 31 Bcf and 28 Bcf, respectively, according to EIA. Pacific inventories fell by 9 Bcf, while Mountain region stocks declined by 7 Bcf. The South Central decrease of 4 Bcf followed and included a 3 Bcf pull from nonsalt facilities and a 1 Bcf decrease in salts.

Early estimates for the next EIA report point to another below-average draw. However, the market could erase 80 Bcf from the storage surplus versus the five-year average over the subsequent four storage reports, according to EBW Analytics Group. The firm said this is largely the result of colder March weather, as well as coal-to-gas fuel substitution in the power sector, along with the slow restart of Freeport LNG.

The Freeport terminal on Thursday was taking in nearly 1.3 Bcf/d of feed gas. The facility earlier this week asked federal regulators for approval to begin commercial operations from Train 1. Train 3 has been restarted and is in full commercial operations. Train 2 is also in the process of restarting after the Federal Energy Regulatory Commission granted approval last week.

On the supply side, production growth appears to have tapered off. Average supply over the past 15 days was down 0.9 Bcf/d from the first half of January, according to EBW. What’s more, several exploration and production companies have indicated they plan to reduce activity in response to the lower price environment. Chesapeake Energy Corp., Comstock Resources Inc., EQT Corp. and Southwestern Energy Co. are among the gassy producers that plan to drop rigs or may do so if prices stay lower for longer.

“These are the first steps of a larger undertaking required to balance the market this year,” said East Daley Analytics’ Robert Wilson, vice president of analytics. “Part of the ‘problem’ in plays like the Haynesville Shale is that it’s hard to hit the brakes on growth.”

Wilson said the reduction in rigs helps, but the high initial production rates keep players like Comstock growing despite the rig reduction. “We need to take 2 Bcf/d off, so subdued growth won’t do it.”

Wilson said even lower gas prices are needed to balance the market.

For now, EBW said the most extreme bearish scenarios for natural gas are off the table. Traders with long-held short positions may increasingly take profits and close positions via buying a natural gas futures contract, according to the firm. This would further propel upward momentum.

“Still, while market momentum remains to the upside, a short-covering rally could easily run out of steam and may prove difficult to sustain beyond the near-term window,” EBW senior energy analyst Eli Rubin said.