Market Update: December 12, 2024

This Week's Update:

A shift to a mild mid-December weather outlook and rising supply drove the January natural gas contract down last week. Sub-$3.00/MMBtu pricing is likely as cold weather expectations wane and production continues to build, causing Gas spot prices to weaken.

• While current conditions are bearish, a severe cold snap over the next 30-45 days could trigger a market overreaction and increased prices.

In the near term, prices face downward pressures due to ample supply and new expectations of mild mid-December weather. Potential cold risks from Canada could introduce near-term price volatility, but a mild scenario remains the most likely outcome. 

Longer-term, the market is expected to trend lower gradually without sustained cold, pressured by robust storage levels, record Canadian inventories, and rising U.S. production. However, the possibility of another severe cold spell could lead to a sudden and significant price rebound, likely before the end of December or early 2025.

Fundamentals:

• Natural gas production was flat around 103.5 Bcf/d. This is down 1.5 Bcf/d from the production levels of Dec 2023, but current production levels are the highest they’ve been since August of this year – adding bearish pressure.

• Natural gas demand decreased over the weekend as temperatures across the U.S. warmed from the first week of the month.

Gas Storage: 

• For the week ending November 29 inventories are 4.9% more than the same period last year and 7.8% more than the 5-year average.

• Early December production is up by 2.2-2.4 Bcf/d compared to November averages. This rising production, in addition to current storage surplus, is contributing to the bearish market outlook, or the belief that prices will go down.

Gas Prices: All time

Gas Prices: 1 week

WoW change: + $0.041 $/MMBtu

Weather:

• The second half of December is expected to be dominated by warmer weather, putting downward pressure on NYMEX prices (bearish). Forecast variability could increase price volatility, but a mild scenario remains the most likely outcome

Near Term:

• Natural gas prices face continued downward pressure as milder mid-December weather reduces heating demand by 12 Bcf/d, while production remains elevated. Storage remains significantly above the five-year average, further weighing on prices. Although December is expected to be warmer overall, potential cold risks from Canada could introduce price volatility in the weeks ahead. Still, a mild scenario remains the most likely outcome

January Daily Rate Tracker:

February Daily Rate Tracker:

Long Term:

• The primary bullish (belief prices will go up) risk for NYMEX natural gas futures over the next 30-45 days lies in the potential for a severe cold outbreak in early January, as colder weather patterns could drive prices higher. However, current structural oversupply keeps downward pressure on prices, with storage projected to reach 200 Bcf above last year’s levels by mid-January, adding to bearish sentiment. Without sustained cold, the market is expected to trend lower gradually, pressured by robust storage levels, record Canadian inventories, and rising U.S. production. However, the possibility of another severe cold spell could lead to a sudden and significant price rebound, likely before the end of December or early 2025.

July Daily Rate Tracker: