The Energy Buyer's Guide | 11.25.2024
Natural gas futures push sharply higher ahead of the first major cold snap of the winter season.
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- Natural gas futures finished sharply higher after a volatile week of trade, with the front of the forward curve surging to the highest levels of 2024 and posting its first weekly settlement above $3.00 per MMBtu since January
- Near-term weather forecasts show unseasonable cold in key population centers, which has proven supportive of natural gas and power futures for the remainder of winter and beyond
- Spot energy prices started moving higher late last week and are likely to continue on that trajectory in the coming weeks as the cold arrives
- Natural gas storage levels posted the first net deduction of the season, dropping by 3 Bcf during the second week of November
Benchmark natural gas futures prices increased significantly last week, with the December 2024 contract pushing past $3.00 per MMBtu and posting a weekly gain of more than $0.30 per MMBtu. Gains were more measured for the Balance-of-Winter and Summer 2025 strips, but prices were higher across the board. The market did finish well off of the weekly highs, as bullish momentum appeared to run out at least temporarily on Friday. The weekly trading range for the prompt-month contract was the widest since January at $0.73 per MMBtu, illustrating enhanced market volatility as heating season ramps up.
Near-term weather conditions are overtly bullish, with much cooler-than-normal temperatures anticipated in the populous Midwest and East. While the duration of the supportive temperature patterns remains to be seen, so far there are no strong indications of a fast return to the much warmer-than-normal weather that has defined most of November in these regions. With demand set to rise considerably in the coming weeks, all eyes are on the supply side of the balance sheet. Domestic production responded nicely to higher spot prices and rising demand last week, pushing back above 101 Bcf per day. However, volumes are still well below the 105 Bcf per day levels that were recorded at this point in 2023, and all signs still point to a tighter winter fundamental balance than what was observed during the 2023-24 season. Storage withdrawals are expected to ramp up quickly in the coming weeks, and inventories are likely to finish the winter at a deficit to year-ago levels.
Until we see any indication that the upcoming cold snap will reverse course quickly or that producers are poised to flood that market with excess supply, Pinebrook Energy Advisors is maintaining a bullish outlook for the near and medium terms.
