Weather and Demand
6-10 & 8-14 DAY TEMPERATURES
- The new year has kicked off with a deep freeze across much of the United States, causing significant volatility in natural gas pricing. Prices surged above $3.80 temporarily, but forecasts of warmer weather in the latter half of the month led to a sharp drop of nearly 30 cents on Friday. This pattern of price fluctuations is expected to continue with each cold front. For the week of January 6-12, a frosty weather system is sweeping across the country: Eastern two-thirds of the US: Lows ranging from -10s to 20s°F
- Texas and the South: Chilly lows of 10s to 30s°F
- West Coast: Milder, with highs of 40s-70s°F
- Interior US (by next weekend): Moderating temperatures with highs of 20s-50s°F
- The severe cold not only increases demand but also potentially affects supply. Freeze-offs at natural gas drilling sites could reduce production just as demand spikes.
NATURAL GAS STORAGE REPORT
Supply and Pricing Strategy
- With the release of the 2025 pricing forecast, experts recommend a variable product strategy for both gas and electricity. While the trend for 2025 is upward, prices are expected to decrease from 2026-2030.
- To avoid locking in higher rates, consider:
- For gas: NYMEX + strategy
- For electricity: Block and index strategy
- This approach allows flexibility in adapting to market changes and avoiding premiums associated with long-term fixed contracts.
UPCOMING LNG FACILITIES
LNG Demand and Exports
LNG exports have become crucial in natural gas pricing due to their impact on domestic storage. Recent developments include:
- Plaquemines LNG facility: Now online, exporting slightly under 1.0 Bcf/day
- Expected to reach 2.6 Bcf/day at full capacity
- Upcoming Golden Pass LNG facility in Texas: Will add another 2.0 Bcf/day when fully operational
- Current LNG exports: Approaching 15 Bcf/day
- Potential for a significant increase due to Ukraine cutting off Russian gas transit to Europe on January 1
The European Union has diversified its natural gas sources, with the US becoming a major supplier. Countries like Slovakia, Austria, and Moldova, which still rely heavily on Russian gas, may be most affected by this recent development. As we navigate through this volatile energy landscape, staying informed about these factors will be crucial for making strategic decisions in the coming months.
NYMEX 12-MONTH STRIP
ALL ABOUT THE NYMEX TWELVE-MONTH STRIP
• The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
• A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
• The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
• The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
• The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
• The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.
NYMEX ROLLING PROMPT MONTH
