The Energy Buyer's Guide | 12.16.2024
Futures rallied, but spot energy prices relaxed from early-season highs.
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- Natural gas futures turned back to the upside last week, finishing higher despite relaxing significantly from the weekly peak
- Natural gas inventories declined by 190 Bcf during the week ended December 6 -- the largest weekly withdrawal ever that early in the winter season
- Near-term temperature forecasts show another period of unseasonable cold on the way for the eastern half of the U.S. starting next week
- Spot natural gas and power prices were lower on the week but most markets saw average pricing come in well above pre-winter levels
Natural gas futures were higher across the board last week, as the market continues to swing back and forth in a volatile manner based on shifting near-term weather forecasts. The prompt-month January 2025 contract gained $0.20 per MMBtu on the week but finished on Friday well off of its weekly highs. That contract spiked to a high just below $3.56 per MMBtu on Thursday before upward momentum seemed to run out for the balance of the week. The weekly high was virtually in line with the high traded on November 22 prior to a downside reversal. If prices turn back to the upside in the coming days or weeks, that price level could represent an important line of technical resistance for the prompt-month NYMEX contract. Gains were less pronounced deeper across the forward curve, with Summer 2025 adding just $0.05 per MMBtu on the week and remaining at a steep discount to subsequent seasonal strips.
The storage withdrawal for the week ended December 6 came in at 190 Bcf, which is the largest on record that early in the winter season. This is indicative of the impact of a period of cold weather against the backdrop of a tight underlying fundamental balance. The market is currently anticipating another cold snap beginning early next week, which is forecast to bring the highest heating needs so far this season. With the vast majority of the winter season still ahead and the demonstrated pattern of intermittent periods of cold across key population centers, the risk premium in January and February contracts appears justified. If this pattern continues, we would anticipate ongoing volatility in forward and spot pricing.
Pinebrook Energy Advisors maintains a neutral market outlook for the remainder of the season, but this view is contingent on realized temperature patterns as the season ramps up.
