Weather and Demand
A chilly forecast is sweeping across the United States, promising another significant withdrawal from natural gas reserves in the coming days. Despite the extreme cold, production experienced a slight dip of a few Bcf/d last week, likely due to well freeze-offs in North Dakota and the Permian Basin.
6-10 & 8-14 Day Temperature Forecasts
Supply and Pricing
Storage Levels: Currently, we have a surplus of 77 Bcf compared to the five-year average. However, this surplus is expected to vanish with next week’s report. Projections indicate that we may end this winter with less gas in storage than at the conclusion of winter 2024, potentially creating upward pricing pressure.
Natural Gas Storage Report
Price Movements:
- Gas prices briefly surpassed the $4.00 mark last week.
- However, forecasts of warmer air moving in from the west over the next two weeks caused prompt month pricing to retreat to $3.78 over the weekend.
- The rare venture above $4.00 also triggered profit-taking by many investors.
LNG Demand
Despite the slowdown in production due to well-head freeze-offs, LNG exports remain near record highs. This has accelerated the withdrawal from natural gas reserves and placed upward pressure on pricing.
Recommendations
Our primary advice remains unchanged: Eliminating premiums and fixed pricing should be your top priority. These are additional costs that can be avoided. We recommend working with a variable strategy where possible and eliminating as many premiums as possible.
Natural Gas Production Report
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
We will monitor these indicators closely and provide updates as the situation evolves.
Stay warm and energy-efficient!
