Provident Energy Consulting

NYMEX January Gas Dips on Above-Average Weather Outlook

The NYMEX January natural gas futures contract dipped 11.2 cents and settled at $3.726/MMBtu Wednesday amid a warmer-than-average weather outlook for January.

The front-month contract moved between $3.563/MMBtu and
$3.893/MMBtu. The near-term contract rebounded Tuesday by 31
cents after losing more than a dollar over the past five days.
“The drop in prices is a technical move, a Christmas profit-taking
move,” said John Woods, president of JJ Woods Associates. "The
market is still very bullish and is waiting for the next cold snap.”
Prices may continue to weaken as the National Weather Service
forecast calls for a likelihood of above-average temperatures for
much of the US in January, which is likely to keep demand within
seasonal norms.
The seasonably higher temperatures over the past few days have
resulted in dissipating demand, largely driven by weakening heating
demand. Total US demand is set to drop to 96.8 Bcf Wednesday,
down 5.2 Bcf on day, after pushing above 100 Bcf the day prior,
according to S&P Global Platts Analytics, las temperatures are
expected to rise in the Northeast.
Platts Analytics estimates demand to increase and average 101.7
Bcf/d over the next eight to 14 days.
Residential and commercial demand, which averaged 48.5 Bcf/d in
the first 12 days of December, is set to fall 3.8 Bcf on day to sit at 37.8
Bcf Wednesday, with 1.4 Bcf coming from the Northeast alone. Platts
Analytics estimates heating demand to average about 40 Bcf/d over
the next 14 days as the warm-weather spell continues. Heating
demand averaged 57.1 Bcf/d during the same time period a year ago.
With temperatures staying within seasonal norms for much of the
country, withdrawal for the week ended December 14 is expected to
stay in line with the five-year average of 144 Bcf. A consensus of
analysts surveyed by Platts Analytics estimate a 145-Bcf draw.

Source: Platts 2018

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