Prompt futures prices at the Henry Hub rallied in Feb. 1 trading as near-term weather forecasts turned bullish, predicting significantly colder temperatures over the next month than previously anticipated.
At mid-session, the NYMEX March contract was up nearly 30 cents, or about 10%, to the mid-$2.80s/MMBtu. In the cash market, Henry Hub gas prices also moved sharply higher, rising almost 20 cents to $2.86/MMBtu, data from CME Group and Intercontinental Exchange showed.The dramatic turnaround in gas prices, which dipped into the low-$2.40s in late January, comes as forecasts from the National Weather Service and others foreshadow a bullish turn for the gas market.
In February, more than 25 states stretching from California to Pennsylvania face a 33% to 60% risk for below-average temperatures, according to a revised 30-day outlook published Jan. 31 by the National Weather Service. Notably, all the states across the Midwest–a critically important region for US residential-commercial gas demand–are expected to see colder temperatures this month.
Supply and demandWinter to date, US heating demand has largely underperformed the historical record, averaging 39.7 Bcf/d from Nov. 1 to date–about 1 Bcf/d, or 2.5%, below the prior five-year average.
On Feb. 1, res-comm demand continued falling from seasonal highs recorded last week, dipping to an estimated 48.3 Bcf/d. Over the next several days, demand is expected to ease further, hitting a low around 47 Bcf/d later this week. By Feb. 7, though, current forecasts show total US heating demand reaching another seasonal high at nearly 62 Bcf/d, data from S&P Global Platts Analytics shows.
With the US supply-demand balance tightening, analytics forecasts now predict a steep decline in the gas storage surplus over the coming weeks–a factor that could keep prices higher over the longer term.
In its most recently issued storage report, the US Energy Information Administration estimated national stocks at 2.881 Tcf in the week ended Jan. 22–a nearly 245 Bcf surplus to the five-year average. By the week ending Feb. 11, though, a forecast drawdown of more than 580 Bcf is expected to narrow the current surplus to just about 75 Bcf, Platts Analytics forecasts show.
Summer, Q4 pricesWith US gas production relatively stable around 91 Bcf/d, or about 2.5% below its year-ago level, lower season-ending storage levels could prime injection demand this summer, keeping prices higher for longer.
In Feb. 1 trading, NYMEX futures prices for the upcoming summer months gained about 16 cents, rising to over $2.90/MMBtu for July, August and September. Fourth-quarter contracts made smaller gains, rising about 13 cents, to the mid-$2.90s and low-$3/MMBtu range, CME data showed.
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