The February Nymex natural gas futures contract closed at $2.49/MMBtu, down 13 cents from the January settlement price of $2.62/MMBtu. In the last day of trading: Monday January 29, the February contract slid 22.2 cents as bearish weather forecasts crushed market expectations for mid-winter. On top of bearish weather data, lower-48 natural gas production growth shows no signs of slowing down. Initial estimates from this morning’s Natural Gas Billboard Report show production free & clear from freeze-off conditions at 104 bcf (see chart below). Despite the gargantuan 326 bcf storage withdrawal reported by the EIA for the week ended January 19, natural gas stocks were 110 Bcf higher than last year and 142 Bcf above the five-year average. This combination of high seasonal production, above-average storage and a warm winter outlook is a perfect storm for bearish market conditions at a time of year when the market historically sees the most demand. For the near future, it’s unclear how producers could react if gas prices plummet further with winter halfway out the door and the relatively large, reported storage surplus. It is particularly true in the Bakken and Appalachia regions, where Bakken production has recently come back from freeze-offs and Northeast producers having to walk the line with limited egress capability to demand centers outside of their local market.
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Heat of the Moment - High Gas Production, Historically Low Heating Demand Keep a Lid on Prices
So far this winter, front-month CME/NYMEX natural gas futures have fallen, risen and fallen again but, until their most recent dip, generally remained within the same $2.30-to-$3.30/MMBtu range where they have been lingering since mid-2023. With production sustaining near-record levels, LNG export volumes down from the winter highs, and temperatures back to normal, the supply of gas remains plentiful — a bearish scenario. In today’s RBN blog, we look at why there’s been a lid on natural gas prices — and the odds that the situation might change before the rapidly-approaching end of the winter season.
NATGAS Billboard – The #1 Hit For Natural Gas Markets – Highlighting The Report Features
CME/NYMEX Henry Hub gas futures prices are currently struggling to stay above $2.00/MMBtu in the face of milder weather and record high production (closing up slightly at $2.038/MMBtu yesterday February 3, 2016). The market is on edge and at the mercy of daily weather forecast revisions that may signal further downside for prices. At the same time gas demand from power generation could increase in response to lower prices. To help navigate these volatile market conditions, we’ve teamed up with Criterion Research to develop the daily NATGAS Billboard: Natural Gas Outlook report. In today’s blog, we highlight specific features of the report and what they tell us about the market.
Arctic Shuffle - February Polar Vortex Effect Puts $3/MMBtu Gas Prices Back in Play
Weather is the perpetual wildcard in the natural gas market, but it’s been particularly shifty this winter, keeping market participants — and weather forecasters, for that matter — on their toes. Gas futures prices started this season at $3.30-plus/MMBtu, but then endured some of the warmest weather on record (in November and January), including a couple of polar vortex head fakes over the past month or so — weather forecasts at times in January started off much colder but ultimately reversed course. Prompt CME/NYMEX Henry Hub futures prices have seesawed as a result. Despite the weather setbacks, however, prices have held on in the $2.40-$2.70/MMBtu range through much of winter and averaged more than $0.60/MMBtu higher year-on-year in January. And, with an Arctic blast set to unfurl across the Lower 48 this week, prices last Friday topped $3/MMBtu again in intraday trading before settling in the high-$2.80s/MMBtu Friday and Monday. Today, we examine the supply-demand factors underlying the recent price action, and prospects for sustained $3/MMBtu gas prices.
