Market Update: January 8, 2025

This Week's Update:

February contract prices have shown dramatic swings, with seven moves of $0.30 or more in six trading sessions. Prolonged cold weather may suppress natural gas output for another two weeks, potentially driving significant January storage withdrawals.

• While severe cold has briefly boosted January Henry Hub spot prices, its impact on February physical pricing is expected to be limited. Milder February weather and returning production could cap February contract premiums.

In the near term, persistent, intense cold is causing significant price spikes in regional markets. However, January cold is unlikely to sustain similar February risk premiums without substantial cold anomalies continuing. NYMEX Futures could trend bearish (prices down) into Feb and March.

Longer-term, the market is expected to shift focus to a structurally softer spring with robust production and milder weather. These factors are likely to weigh on NYMEX futures over the next 30-45 days, solidifying a moderate bearish trend (prices go down).

Fundamentals:

• Despite projections coming in a bit less colder than last week's forecast, U.S. gas production has continued to take a hit after reaching all time highs on Dec. 31, with lower 48 volumes dropping below 103 Bcf/d for what looks like the rest of the week. Production is expected to recover by Jan. 12, thereby limiting the supply disruption.
• Demand is currently sitting at 153 Bcf/d alongside the spike in res/com demand and LNG holding around 15 Bcf/d. 

Gas Storage: 

• For the week ending December 27 inventories are 1.9% less than the same period last year and 4.7% more than the 5-year average.

Gas Prices: All time

Gas Prices: 1 week

Change since 12/16: + ~$0.40 $/MMBtu

Weather:

• The cold snap for the next two weeks has been forecasted less severe than previously projected, but is still highly in flux – leading to high gas volatility and substantial increases to Jan prices
• Arctic air may dominate through late January, but warming patterns in the Southeast could emerge by early February. These shifts may further pressure NYMEX futures down as the market anticipates weaker demand.

Near Term:

• Persistent, intense cold is eroding the storage surplus, potentially pushing the Lower 48 into a deficit within 2-3 weeks. Daily storage withdrawals may reach 30-35 Bcf/d through mid-January, with the possibility of a record monthly storage pull if freeze-offs persist.

  • Regional basis markets are experiencing significant price spikes. However, January cold is unlikely to sustain similar February risk premiums without substantial cold anomalies continuing.

  • Milder weather and production recovery are expected by February, limiting the potential for elevated risk premiums. NYMEX futures could trend bearish, with February contracts struggling to sustain prices near $3.50/MMBtu.

Feb Daily Rate Tracker:

Mar Daily Rate Tracker:

Long Term:

• February and March are expected to be milder than normal, with heating demand significantly below historical averages. Unlike last winter’s price-driven production cuts, output is expected to remain strong, potentially setting seasonal records and applying downward pressure to prices
  • However, lower 48 storage levels are expected to remain below the five-year average during this time, a bullish factor not seen since 2022. This deficit could amplify price risks in the event of unexpected late-season cold but is unlikely to support a sustained bullish trend.
  • Instead, as March takes the front-month position over the next 30 days, the market is expected to shift focus to a structurally softer spring with robust production and milder weather. These factors are likely to weigh on NYMEX futures over the next 30-45 days, solidifying a moderate bearish trend (prices go down).

August Daily Rate Tracker: