Provident Energy Consulting

NYMEX December Gas Spikes on Weather Forecast, Tight Supply

The NYMEX December natural gas futures contract spiked 17.6 cents and settled at $3.719, likely due to a cold forecast across much of the US and tight supply.

The front-month contract moved between $3.552/MMBtu and
“The fact that we are anticipating some degree of weather in
combination with tight inventory situation has pushed the market to
move substantially higher,” said Alan Levine, chairman and CEO of
brokerage PowerHouse.
Prices Friday broke past the year-to-date high front-month
settlement of $3.631/MMBtu on January 29. The contract may
continue to move higher with the possibility of hitting $4/MMBtu with
the National Weather Service calling for a likelihood of a cold snap
across much of the country over the next six to 10 days.
“Seasonal aspects of pricing should not be a surprise,” Levine said.
Total US demand is set to stand at 95.5 Bcf Friday, up 6 Bcf on
day, according to S&P Global Platts Analytics, as heating demand
likely continues to grow on falling temperatures in the Midwest and
Eastern regions.
Over the next seven days, demand is estimated to average 99.6
Bcf/d, the data showed, further strengthening prices.
On the supply side, total US dry gas production is set to stay
relatively flat on day and stand at 84.5 Bcf Friday. Platts Analytics
estimates show production averaging 84.5 Bcf/d over the next
seven days.
Year to date, production averaged 79.5 Bcf/d, up nearly 8 Bcf from
the year ago levels 71.9 Bcf/d for the same time period.
Despite production showing extraordinary gains in the year so far,
national gas stock stands at a 16% deficit to the five-year average of
3.829 Tcf, according to the US Energy Information Administration. Much of the gains in production was likely absorbed by the increased exports to Mexico as well as new exports to similar locations, Levine said.

Source: Platts 2018

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