Natural gas futures are trading slightly lower on Wednesday, but inside yesterday’s trading range which tends to indicate trader indecision and impending volatility. While cash market prices continue to reach stratospheric levels at hubs all over the country, the futures market is a little more subdued.
At 15:34 GMT, April natural gas is trading $2.955, down 0.028 or -0.94%.
Historic Day in Natural Gas Spot Market
The Natural Gas Intelligence (NGI) Daily Gas Price Index on Tuesday recorded previously unheard of day-ahead prices as high as $999.00 amid extreme cold plunging deep into the Lower 48.
“Pipelines are still reeling from the cold,” analysts at Wood Mackenzie said in a note to clients early Wednesday. They noted numerous operational flow orders and forces majeure issued in recent days.
Production has also “dropped precipitously” amid the cold weather, according to the firm.
Lower 48 production dropped below 75 Bcf/d as of Monday after revisions, “which is a level not seen since January 2018,” Wood Mackenzie analysts said. “For perspective, Lower 48 production was coming in above 90 Bcf/d just 10 days ago on February 5.”
“There could be a fair amount of gas in the Permian Basin and on intrastate pipelines being delivered directly to meet local demand rather than showing up as production in our models,” the analysts said.
Steep Declines in Production Offset
EBW Analytics Group analysts noted that “massive power outages” and losses in industrial and liquefied natural gas (LNG) feed gas demand have been mitigating the effects of the steep declines in production.
“Natural gas remains subject to strongly conflicting forces,” the EBW analysts said. The Energy Information Administration (EIA) “is expected to report huge draws this week and next. Restoring production will take time, and LNG exports and industrial demand will start to rebound soon.”
Short-Term Weather Outlook
NatGasWeather is saying, “The worst of the cold is over for Texas but still frigid with lows of 0s to 30s, just not nearly as much coverage of lows below 10F compared to previous days. Texas and surrounding states will see temperatures gradually moderate in the coming days, eventually becoming rather mild next week with highs of 60s and 70s widespread across the southern US as the above image shows.
Overall, very strong demand through Sunday as cold slowly moderates, then a milder U.S. pattern February 23-March 3 as temperatures warm to near normal or slightly above normal for most of the U.S. besides the colder Rockies. The early March pattern needs close watching in case of colder trends in time.”
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