Weekly natural gas cash prices rode a roller coaster of steep gains and losses in the volatile Northeast, where bidding on natural gas tends to swing more than other regions due to limited pipeline capacity and erratic weather.
Ultimately, prices in the region settled firmly in positive territory as forecasters warned of a major winter storm expected to form along the East Coast over the weekend. The Nor’easter was forecast to deliver freezing air, several feet of snow and dangerous winds. NGI’s Weekly Spot Gas National Avg. for the Jan. 24-28 period followed the Northeast’s lead, gaining 34.0 cents to $6.495.
Spot natural gas prices have advanced every week to date in 2022.
Fueled by a large decrease in inventories and a massive surge of buying into expiration, meanwhile, the February Nymex contract rallied throughout the week and settled at $6.265/MMBtu on Thursday, up 57% from the prior week’s close. It gained $1.988 on Thursday alone before rolling off the books.
March took over as the prompt month on Friday and jumped 35.6 cents day/day to $4.639.
Forecasters predicted strong weather-driven demand in the week ahead, a likely catalyst for cash prices.
A “frigid cold shot is expected to sweep across the northern, central, and eastern U.S., including another round of frosty temperatures into Texas and the South, while frigid over the Midwest to the Ohio Valley with lows of -20s to 20s for strong/very strong national demand,” NatGasWeather said.
The February contract topped $7.00 in intraday trading on Thursday, easily surpassing any session high to date in 2022.
Analysts attributed the surge in part to accelerated buying into prompt-month expiration, which has become commonplace. EBW Analytics Group noted that gas contracts rolling off the board have surged in 13 of the past 15 months.
That noted, repeated bouts of frosty weather in the nation’s midsection and in the East have fueled strong demand in January and necessitated increased draws upon inventories.
Indeed, the U.S. Energy Information Administration (EIA) on Thursday reported a withdrawal of 219 Bcf natural gas from storage for the week ended Jan. 21. It marked the biggest pull of the winter season to date and surpassed the averages of recent history.
By region, the South Central decrease of 81 Bcf led all others. The Midwest and East regions followed with pulls of 69 Bcf and 60 Bcf, respectively, according to EIA.
Last year, EIA recorded a total 137 Bcf withdrawal from storage in the similar week, while the five-year average draw is 161 Bcf.
The pull also flipped inventories from a surplus of 33 Bcf relative to the five-year average to a deficit of 25 Bcf. The draw left inventories at 2,591 Bcf, below the year-earlier level of 2,899 Bcf and below the five-year average of 2,616 Bcf.
Additionally, the recent rounds of chilly air have caused freeze-offs in key gas-producing basins, curtailing output.
Production hovered below 94 Bcf during the latest EIA report period – about 3 Bcf lower than late 2021 highs — and output remained below 94 Bcf during much of the past week.
What’s more, demand remains strong for U.S. exports of liquefied natural gas (LNG), given supply shortages in Europe. LNG feed gas volumes topped 13 Bcf multiple times over the past week, hanging close to record levels.
The “blast higher” in futures over the past week “may reset near-term natural gas market expectations, driving the March contract above technical resistance levels and pointing short-term technicals in a bullish direction,” said EBW’s Eli Rubin, senior analyst. “Many market participants are also actively reassessing upside risk exposure.”
Next-day cash prices rallied Friday along with futures as a sprawling storm approached the East Coast, threatening dangerous wind chills and several inches of snow along a trek including New York City and Boston.
NGI’s Spot Gas National Avg. gained $1.395 on the day to $7.710
National demand was strong Friday throughout most of the Lower 48 and was forecast to prove robust through the weekend as weather systems across the Midwest pushed to the East, delivering subzero lows in some areas and more than a foot of snow in others.
Still, prices in the East led the charge ahead of what was expected to be a menacing weekend storm.
Residents throughout the Mid-Atlantic and New England were warned Friday of a Nor’easter moving along the Eastern Seaboard Friday night into Saturday. AccuWeather forecasters said the storm could dump more than three feet of snow and drive up to 90 mph winds, causing severe blizzard conditions in Greater Boston and neighboring markets.
“This is going to be a dangerous, life-threatening storm, especially in southern New England,” AccuWeather chief meteorologist Jon Porter said.
“Bands of heavy snow will develop in eastern New England during the heart of the storm that can produce two-to-four inches of snow per hour — extremely intense snowfall rates,” Porter said Friday. “Travel is likely to be nearly impossible in parts of southeastern New England on Saturday and Saturday night.”
Similar conditions were forecast for the immediate coasts of New Jersey, southern Delaware and eastern Maryland, according to AccuWeather.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1258 |