Natural gas gets boost on cold weather outlook

Commodities

A cold snap could give natural gas prices a jolt this month according to the latest weather forecasts.

Natural gas trading

Henry Hub futures begin the year in the green

We welcome 2022 with positive moves from US natural gas futures.

The Henry Hub contract is up about 0.4% on the day at the time of writing, drawing on positive momentum generated on New Years Eve 2021 and into the first week of January 2022.

Currently, US natural gas futures were trading for around $3.835.

Prices have been given a boost by cold weather forecasts. We’ve spoken a lot about the weather recently, in particular cold weather coming from Canada to sweep down into the US. These forecasts were driven by data from November, but we saw milder temps weigh on demand and price action.

However, we could be in for a colder January across the mainland United States if the latest weather data proves accurate.

Natural Gas Weather states: “Demand will be strong across most of the US this morning as frosty conditions linger in the wake of a weekend cold shot with lows of -20s to 20s over the northern US, while chilly over the southern US w/lows of 20s to 30s.

“Temperatures will warm this afternoon through Thursday across the southern and eastern US for lighter national demand, just as another frigid cold shot arrives into the Midwest, then again spreads across the southern and eastern US late in the week for another round of strong national demand. The West will be cool and unsettled early in the week, then warming and drying besides the wetter Northwest/N. Rockies.

“Overall, national demand will swing between HIGH and MODERATE the next 7-days.”

That should feed nicely into improved price action for natural gas traders going forward. There are even rumblings that a deep freeze, such as the one that shuttered much of the nation’s gas production and transmission infrastructure in February 2021, could be on the way too.

As ever, keep watching the latest meteorological reports for updates on US weather. The key to future price action might be found amongst them.

US natural gas consumption drops

Probably as a result of the aforementioned milder temperatures, consumption across the United States fell in December, according to the latest available EIA data.

For the week ending 24th December 2021, nationwide consumption of natural gas fell by 1.2 Bcf per day. This marked the second consecutive week with a notable fall in gas use.

In the residential and commercial sectors, consumption declined by 2.8% across most of the United States during the report week. Industrial sector consumption decreased too.

A quick look at US natural gas inventories

The newest natural gas stockpiles data from the EIA comes on Thursday, January 6th.  Ahead of that, let’s examine the previous report to gauge current natural gas demand.

Working gas in storage was 3,226 Bcf as of Friday, December 24, 2021, according to EIA estimates.

This represents a net decrease of 136 Bcf from the previous week. Stocks were 250 Bcf less than last year at this time and 19 Bcf above the five-year average of 3,207 Bcf.

At 3,226 Bcf, total working gas is within the five-year historical range.