Provident Energy Consulting

NYMEX January Gas Sees Slight Increase on Mixed Short-Term, Long-Term Weather Forecast


The NYMEX January natural gas futures contract rose 1.2 cents Wednesday and settled at $4.469/MMBtu, as the market sought to balance a cold, short-term temperature forecast with the warmer outlook on the horizon.

The front-month contract wandered between $4.404/MMBtu and
$4.63/MMBtu.
The US National Weather Service forecast calls for pockets of colderthan-average temperatures over the next six to 10 days, but temperatures are likely to be around seasonal averages for the rest of the US. Looking ahead, warmer temperatures are forecast for much of January.
“The market started off with early strength, but soon gave up
these gains” in trading Wednesday morning, said Phil Flynn, senior
market analyst at Price Futures Group.
The modest incursion into positive territory also comes as a storage
withdrawal of 57 Bcf is expected for the week that ended November 30, a close match to the five-year average of 58 Bcf, according to a consensus of analysts surveyed by S&P Global Platts Analytics.
The gas market has seen extreme volatility lately and seems to be
uncertain about whether to focus on the cold weather forecast or
record high production, Flynn said.
US dry gas production continues to steam ahead, averaging 85.5
Bcf/d in the first five days of December, up 8.4 Bcf/d year on year,
according to data from Platts Analytics. The huge jump in production
kept prices below the $3/MMBtu mark for most of the year until the
recent cold snaps.
Output is projected to see slight declines over the next seven days,
averaging 84.7 Bcf/d, the data showed, likely due to freeze-offs.
The “increase in exports to Mexico has also given a psychological
boost to the market, keeping natural gas prices strong,” Flynn said.
Exports to Mexico have averaged 4.899 Bcf/d since the start of
October, compared with 4.367 Bcf/d in the year-ago period.

Source: Platts 2018

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