NYMEX January natural gas jumps on long-term weather forecast, strong demand

The NYMEX January natural gas futures contract jumped 16.1 cents to settled at $4.488/MMBtu Friday as current and upcoming weather trumped a storage withdrawal that was largely in line with the five-year average.

The front-month contract traded between $4.231/MMBtu and $4.57/MMBtu on Friday.
The storage withdrawal of 63 Bcf in the week that ended November 30 put US gas inventories at 2.991 Tcf, according to the US Energy Information Administration, down 19% compared with a year earlier and at about a 20% deficit to the five-year average of 3.716 Tcf.

The storage pull falls largely in line with the five-year average of 58 Bcf and also with the draw expected by a consensus of analysts surveyed by S&P Global Platts Analytics.

However, the prompt, February and March contracts saw a significant jump in prices on strong demand over the past few days and the upcoming period.

The February contract jumped 16.1 cents to settle at $4.378, while the March contract climbed 23.1 cents to $4.155/MMBtu

Total demand averaged 112.1 Bcf/d over the past three days, up nearly by 21 Bcf/d from 91.2 Bcf/d in the same period a year ago.

Demand is expected to hit 113.3 Bcf Friday and drop 3 Bcf for an average of 110 Bcf/d over the weekend through Monday, Platts Analytics data showed.

The long-term temperature forecast in some models is for a colder-than-normal January, and when combined with four consecutive days of demand above 100 Bcf, it is moving the market higher Friday, Kyle Cooper, an analyst at IAF Advisors, said.

However, the US National Weather Service expects above-average temperatures in January across much of the US.

Total US dry gas production is set to drop 800 MMcf day on day to 84 Bcf Friday, Platts Analytics data showed. Production averaged nearly 86 Bcf/d over the past two weeks.

The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EST.