Natural gas futures slipped further into the red on Thursday despite the potential for cold weather to return to the Lower 48 within the next couple of weeks. With mixed messages in the latest storage data, and Freeport LNG not yet back online, the March Nymex gas futures contract settled at $2.456/MMBtu, down 1.2 cents on the day.

EIA storage02022023

At A Glance:

  • Futures relatively steady
  • Weather outlook uncertain
  • New England cash soars

The real price action of the day was in the cash markets. After a harsh winter in which the West Coast has dominated headlines and seen gas prices reach record levels, the king of volatility – New England – essentially told the Golden State to hold its Samuel Adams.

Bracing for a polar vortex that could result in “otherworldly” real-feel temperatures, according to forecasters, parts of the region traded as high as $225 for Friday’s gas day. NGI’s Spot Gas National Avg. rose $5.190 to $10.920.

The heart of the cold weather is forecast to unfold across New England from Friday afternoon through Saturday morning as subzero temperatures envelop a widespread area, according to AccuWeather. Boston is forecast to experience one of its top-five lowest temperatures in recorded history on Saturday morning with the mercury predicted to reach 10 degrees below zero.

But AccuWeather said the extreme nature of the upcoming Arctic blast would be unparalleled at the summit of Mount Washington, the tallest mountain in the northeastern United States. There, the AccuWeather RealFeel temperature is forecast to drop to 100 degrees below zero at the mountain’s summit in northern New Hampshire on Friday night into Saturday morning. The actual temperature may bottom at 45 degrees below zero.

The extreme weather is not expected to be long lasting across the Northeast, AccuWeather said. A milder, tranquil weather pattern is forecast for the first full week of February. However, that didn’t stop a buying spree in the cash market across pipeline-constrained New England.

PNGTS spot gas shot up $107.385 day/day to average $121.550 for Friday delivery. It traded as high as $225. Iroquois Zone 2 hit $200, while Algonquin Citygate touched $175.

Over in New York, Transco Zone 6 NY topped out much lower at $45.000, though it still averaged a sharp $23.750 higher day/day.

Upstream in Appalachia, gains were muted by comparison. Eastern Gas South next-day gas picked up 16.0 cents to average $2.620. Texas Eastern M-3, Delivery was the biggest exception, climbing $28.750 to average $32.890.

Most other locations across the Lower 48 posted day/day changes of less than 50.0 cents, including many to the downside. The West Coast posted steeper losses of up to $12.540 amid returning pipeline capacity upstream.

Benchmark Henry Hub was off by only 1.5 cents, averaging $2.645 for Friday.

Ho-Hum Futures Trading

That modest move mirrored the action in futures trading.

After some early gains brought on because of colder trends in the American weather model, along with steep production cuts because of widespread freeze-offs, Nymex futures ran out of steam.

Bulls looking to the latest government inventory data for signs of support were ultimately disappointed on that front as well.

The U.S. Energy Information Administration (EIA) said 151 Bcf was withdrawn from natural gas inventories for the week ending Jan. 27, coming in on the high side of estimates ahead of the weekly report. Taken alone, this bullish withdrawal may have given bulls the ammunition needed to sustain momentum.

However, the EIA data included a revision from the previous week’s report, which reflected slightly higher levels of storage. The revision in the Midwest region caused the stocks for the week ending Jan. 20 to change to 2,734 Bcf from 2,729 Bcf, according to EIA. This reflected a net draw of 86 Bcf, rather than the 91 Bcf pull originally reported.

Market observers on Enelyst, an online energy chat, took the revision to the prior week’s Midwest stock levels in stride, noting it better aligned with their view of supply.

As for this week’s report, the EIA’s 151 Bcf was on the higher end of a Reuters survey of 14 analysts, which ranged from 133 Bcf to 155 Bcf. That survey produced a median decline in stocks of 142 Bcf. Bloomberg’s survey of eight analysts had a tighter range that produced a median draw of 145 Bcf. A Wall Street Journal poll averaged a 144 Bcf pull. NGI modeled a 141 Bcf draw.

For comparison, the EIA recorded a 261 Bcf withdrawal for the similar week last year, and the five-year average draw stands at 181 Bcf.

Enelyst managing director Het Shah viewed the latest storage report as being 2.6 Bcf/d loose when adjusted for weather. Looking ahead, he expects additional tightness in the next EIA report given the production losses this week.

The return of operations at the Freeport liquefied natural gas terminal could lend to further tightening, according to Shah. The LNG export facility was cleared by federal regulators on Wednesday to begin commissioning, including cooldown, of the LNG rundown piping system and Train 3. Other approvals paved the way for additional steps to be taken ahead of restart.

That said, with only weeks remaining in the peak of winter, Freeport’s return may do little to meaningfully impact prices.

“We don’t need to just be less loose, we need to get tighter…and fast,” said an Enelyst participant.

Broken down by region, the Midwest led with a 46 Bcf decline in stocks, while the East followed with a 44 Bcf drop, EIA said. South Central inventories slid by 42 Bcf, which included a 29 Bcf pull from nonsalt facilities and a 13 Bcf pull from salts. The Pacific withdrew 10 Bcf, and the Mountain withdrew 8 Bcf.

Total working gas in storage as of Jan. 27 stood at 2,583 Bcf, which is 222 Bcf above year-earlier levels and 163 Bcf above the five-year average, according to EIA.

As for what may lie ahead on the weather front, that remains to be seen. NatGasWeather said the midday Global Forecast System (GFS) model held a colder trend in the overnight run and then added a few more heating degree days (HDD), particularly for the Feb. 8-15 period.

This also means the latest GFS data is nearly 20 HDDs colder than the latest European model.

Meanwhile, there’s still strong national demand through Saturday as a frigid reinforcing cold shot sweeps across the Great Lakes and Northeast the next few days, NatGasWeather noted. There also are chilly temperatures over Texas, where freezing rain continues and where more than 400,000 customers are currently without power.

“But like all instances so far this winter, a frosty U.S. pattern is only able to last five to six days before a much warmer pattern is quick to follow, just like what’s coming for next week,” NatGasWeather said.