Weekly natural gas cash prices and futures descended in tandem during a holiday-shortened stretch of trading defined by benign weather, weak demand and stout production.

With traders focused on supply/demand imbalance, NGI’s Weekly Spot Gas National Avg. for the Jan. 17-20 period slid 8.5 cents to $5.490.

At the close of a trading week that was abbreviated by one day because of the Martin Luther King holiday, Columbia Gas was down 17.0 cents to $2.635, while Cove Point was off 67.0 cents to $3.100 and Chicago Citygate was down 19.5 cents to $3.025.

The February Nymex futures contract lost ground three out of four days during the week. It settled at $3.174/MMBtu to close trading Friday, down 10.1 cents on the day and down 7% from the prior week’s finish.

Weather conditions during the covered period were generally mild, with warm weather in the South and chilly but above freezing temperatures over large areas of the Midwest and East. The Rockies and parts of the West proved exceptions at times, with snow in the Mountain West and chilly air lingering in California following heavy rains earlier in the month.

Overall, however, demand proved modest during a period in which production consistently held around 100 Bcf/d – near record levels – putting downward pressure on prices.

Still, forecasters anticipate stronger demand in the week ahead and, with prices hovering near the lowest level since 2021, bargain buyers could step in at any point. Any cold shift in the weather could amplify buying activity, said Marex North America LLC’s Steve Blair.

“I think the market is looking towards the end of January and early February for the return of some cold,” and that could be an “overwhelming factor with prices as low as they are,” Blair, senior account executive, told NGI.

NatGasWeather said freezing air could descend from Canada and usher in cold conditions across parts of the western, central and northern United States in the final full week of January. By the final days of the month and early February, the frosty air could spread to the East, as well, though weather models were inconclusive about the breadth and duration of the Arctic blast.

Futures Struggle

Ahead of winter’s possible return, however, futures traders were left to focus on modest demand and bearish storage prints.

The U.S. Energy Information Administration (EIA) on Thursday reported a storage decrease of 82 Bcf for the week ended Jan. 13.

While major polls found analysts looking for a withdrawal in the 70s Bcf, the EIA result compared bearishly with a five-year average draw of 156 Bcf and a year-earlier pull of 203 Bcf.

NatGasWeather called it a “rather wimpy” result.

It followed a rare January injection of 11 Bcf reported a week earlier.

The decrease for the Jan. 13 week lowered inventories to 2,820 Bcf but left stocks above the five-year average of 2,786 Bcf. 

Looking ahead to the next EIA storage report, analysts are generally expecting another modest pull relative to recent years.

Early estimates for the week ended Jan. 20 submitted to Reuters landed at an average decrease of 78 Bcf. That compares with a withdrawal of 217 Bcf a year earlier and a five-year average decline of about 185 Bcf.

Against that backdrop, some analysts said another round of winter may not be enough for bulls to sustain any momentum. The long-awaited return of the Freeport LNG export facility in Texas, however, may be the next big catalyst. But the timing of the liquefied natural gas plant’s return remains in doubt.

“The upcoming colder-than-normal weather may result in a slight uptick in gas consumption, but a material bullish impact is unlikely as Freeport LNG remains offline,” said Rystad Energy’s Emily McClain, vice president.

Executives at the liquefied natural gas plant, which was forced out of commission last June by a fire, said in recent days they hope to relaunch by the end of this month. Freeport executives have said they intend to ramp up to 2 Bcf/d of capacity within weeks, drawing from domestic supplies and offsetting demand weakness elsewhere.

However, regulatory hurdles caused reopening delays late in 2022, leaving the market skeptical about a timely return to service early in the new year.

“Market participants have struggled for months to unravel the restart mystery,” McClain said. “The plant’s regulatory approval status remains clouded, increasing concerns over the facility extending the restart timeline yet again.” In the meantime, she said, “ample supply will support the market in the short term.”

Friday Cash Prices Falter

Spot gas prices on Friday slumped a third straight day, hampered by the benign weather and solid production. NGI’s Spot Gas National Avg. shed 27.0 cents to $4.825.

Prices varied by region, but hubs posting losses peppered West Texas, the Rockies and California. Collectively, they drove down the national average.

El Paso Permian lost $1.595 day/day to average 35.0 cents, while elsewhere in the Lone Star State, Waha dropped $1.645 to 23.0 cents. West Texas prices have been under pressure amid excess supply, take away constraints and modest demand.

In the Rockies, Northwest Sumas lost 85.0 cents to $13.685. In California, meanwhile, SoCal Citygate fell $1.820 to $14.790 and SoCal Border Avg. dropped $1.725 to $14.285.

While falling Friday, prices in the West this winter have consistently exceeded national averages by a wide margin amid regional supply challenges and, unlike most other parts of the country in January, seasonally chilly weather.

NatGasWeather said that, to start the week ahead, a messy pattern of rain and snow would track across the Lower 48. Cold air would largely be confined to the West and Upper Midwest, with highs in the teens to low 40s.

“The eastern and southern U.S. will be mild to nice with highs of 40s to 70s and why national demand will remain light to moderate despite regionally stronger demand,” the firm said.

However, NatGasWeather added, cold air could spread into the East late in the coming week, making most of the United States colder than normal, with subzero low in northern markets.

Looking at the final days of January and the start of next month, the firm said, “cool to cold temperatures will cover the western, central and northern U.S. with highs of -0s to 40s, while mild to nice over the South and Southeast with highs of 50s to 70s.”