Provident Energy Consulting

NYMEX March Gas Rallies on Cold Near-Term Forecast

NYMEX March natural gas futures contract climbed 5.9 cents and settled at $2.642/MMBtu Monday on near-term cold weather outlook.

The front-month traded between $2.638/MMBtu and $2.744/MMBtu.
The front-month contract settlement averaged $3.10/MMBtu in
January, peaking at $3.591/MMBtu on January 14, and since has
tapered off, averaging $2.649/MMBtu so far in February.
“The market is seeing some strength on the heels of the colder
weather forecast that came out Friday,” said Gene McGillian, analyst at
Tradition Energy.
The US National Weather Service expects below-normal temperatures
for much of February across the US, which is likely to result in larger pulls from storage. As a result, the April and May contracts are also exploring the upside, even though the forecast calls for milder temperatures.
The April contract was trading at $2.69/MMBtu, up 8.6 cents day on
day, while the May contract was up 8 cents to $2.714/MMBtu..
US gas inventories stand at 1.96 Tcf, down 17.5% from the five-year
average of 2.375 Tcf.
Storage-related concerns have been the main driver behind the price
rally since Friday as total US demand dropped nearly 11 Bcf/d over the
weekend and is set to total 111 Bcf on Monday, according to data from
S&P Global Platts Analytics. The decline was spread across the sectors, with heating, power burn and industrial demand all skidding lower.
Total US dry gas production has stayed relatively flat at 84 Bcf/d
since the start of February after averaging 85 Bcf/d in January. Even
though production is up from the 77 Bcf/d level for the same time period in February 2018, extremely cold temperatures in the Midcontinent and the western US absorbed much of this additional output.

Source: Platts 2019

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