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Weekly Natural Gas Cash, Futures Prices Fail to Find Momentum in 2023 Debut
Weekly natural gas cash prices gave up ground amid volatility in the West and moderating temperatures across much of the Lower 48.
NGI’s Weekly Spot Gas National Avg. for the New Year’s holiday-abbreviated Jan. 3-6 trading period fell $1.050 to $5.460.
Freezing conditions to start the new year shifted gradually warmer as the week wore on, with forecasts calling for the trend to continue across large swaths of the county. Entrenched supply challenges and chilling rains in California, along with heavy snow in the Rocky Mountains, kept prices high in the West, but they pulled back some from their lofty year-end 2022 peaks.
SoCal Border Avg., for one, shed 21.0 cents to $19.905, while Malin dropped $2.410 to $17.900. In the Rockies, Opal lost $1.550 to $17.925.
“There’s no doubt the spot market has been all about those prices in the West recently,” Marex North America LLC’s Steve Blair, senior account executive, told NGI. “Volatile, but still high.”
The February Nymex contract, meanwhile, slumped amid forecasts for mild weather through most of this month. It settled at $3.710/MMBtu on Friday, off a penny on the day and down 17% from the prior week’s finish.
Forecasters said natural gas consumption could fall further in the week ahead.
NatGasWeather said warmer-than-normal conditions would “rule the southern and eastern” sections of the country during the week ahead, with highs of 30s to 50s across the Great Lakes, Ohio Valley and Northeast” as well as “very nice upper 50s to 70s over the southern U.S. and up the Mid-Atlantic Coast for very light national demand.”
California could again prove the exception: “The West Coast will be wet and windy with heavy valley rains and mountain snows as a storm tracks inland the next several days with highs of 40s to 60s,” the forecaster said near the close of the trading week.
February Futures Flop
In addition to benign overall weather conditions, a stout but ultimately bearish storage withdrawal left markets disappointed, and this weighed down futures.
The U.S. Energy Information Administration (EIA) on Thursday reported a withdrawal of 221 Bcf natural gas from underground storage for the week ended Dec. 30.
The pull proved robust compared to historic norms – the five-year average was 98 Bcf – but it failed to meet expectations and pushed Nymex natural gas futures deep into the red. Prior to the report, major polls found analysts anticipating a pull in the 230s Bcf. NGI modeled a 237 Bcf decrease.
The withdrawal for the Dec. 30 period lowered inventories to 2,891 Bcf, leaving stocks below the year-earlier level of 3,199 Bcf and the five-year average of 3,099 Bcf.
Wintry weather and production freeze-offs reigned during the EIA report period. Output fell into the 90s Bcf/d. However, most of the Lower 48 had warmed by Friday of the past week and more mild weather was forecast through the end of January.
Diminished demand is expected to accompany the shift in weather, and production had rebounded to near record levels around 101 Bcf/d by Friday.
As such, looking to the next government inventory report, analysts anticipate a relatively modest pull. Early projections for the week ended Jan. 6 submitted to Reuters landed at a median decline of 31 Bcf. EIA posted a decrease of 179 Bcf a year earlier, while the five-year average is 151 Bcf.
“Bearish market pressure is likely to advance with January 2023 forecast as the warmest in more than 15 years,” said EBW Analytics Group’s Eli Rubin, senior analyst. “The most-likely scenario indicates natural gas has further to fall.”
Friday Cash Called Up
Spot natural gas prices pushed ahead Friday for weekend through Monday delivery, led higher by messy weather and chilly air in the West that offset mild temperatures across most of the Lower 48. NGI’s Spot Gas National Avg. ticked up 10.5 cents to $5.135 on Friday.
SoCal Citygate gained 75.5 cents day/day to average $19.400, while PG&E Citygate advanced 49.5 cents to $17.165 and SoCal Border Avg. picked up 54.0 cents to $17.905.
Elsewhere, however, prices were relatively weak. Chicago Citygate, for one, fell 13.0 cents to $3.250, and Henry Hub dropped 34.0 cents to $3.415.
National Weather Service (NWS) forecasts showed above-average temperatures across much of the Midwest, South and East over the coming week. For the third week of January, NWS data pointed to average temperatures – or above – across most of the United States, indicating another stretch of modest demand lies ahead.
The West Coast remains a wildcard following a rash of severe weather in recent days. The region could see an abundance of precipitation – and a continuation of flooding problems following recent rains – with the potential for cooling winds.
Severe storms “unleashed fierce back-to-back blows to California at the end of 2022 and the start of 2023,” AccuWeather meteorologist Alex Sosnowski noted. He said “a series of storms lining up across the Pacific Ocean will continue to aim for the Golden State with rounds of heavy rain and mountain snow” through mid-month. One storm early in the coming week is expected to be followed by another the following week, potentially slamming already drenched areas of northern and southern California.
“The impacts from these upcoming big storms will be to unleash new rounds of torrential rain, flash flooding and mudslides, as well as tremendous, road-clogging snow and avalanche danger over the Sierra Nevada,” Sosnowski said. “The dangers of flooding and mudslides will increase with each passing storm.”
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