The Energy Buyer's Guide | 12.23.2024
Prompt-month natural gas surges to a nearly-two-year high above $3.75 per MMBtu.
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- Natural gas futures finished sharply higher last week following an upside reversal on Tuesday that sent prompt-month pricing to highs not seen since early 2023
- Predictive weather models are starting to align on the possibility of a major cold event shaping up for early January that would lead to volatility in spot natural gas and power pricing
- The 125-Bcf storage draw announced for the week ended December 13 brought stocks back to virtually in line with year-ago levels and further narrowed the surplus to the five-year average
- LNG export demand hit a new record high, with feedgas volumes estimated above 15 Bcf per day at the end of last week as the Plaquemines liquefaction terminal began ramping up operations
Natural gas futures surged sharply higher last week, especially on the front of the forward curve, as traders braced for the potential of another wave of heavy heating demand early next month. The January 2025 contract finished nearly 15% higher than the previous week’s settlement, posting the highest weekly close for prompt-month NYMEX natural gas since January 2023.
The week started off on a bearish note, with the market gapping lower at open last Sunday evening and continuing to slide through midday Tuesday. After the prompt-month contract hit an intraday low of $3.091 per MMBtu early Tuesday afternoon, a wave of buying interest came into the fray and changed momentum dramatically through the end of the week. Friday’s settlement came in $0.65 per MMBtu above the weekly low, indicating a major shift in market sentiment based on expectations that the upcoming period of unseasonable warmth will give way to a much colder pattern after the start of January. The added premium in the January 2025 contract reflects the risk of a volatile month amid strong weather-related demand against a backdrop of a tight underlying fundamental balance.
We’ve already seen LNG exports edge to record territory with feedgas increasing to the new Plaquemines facility. With that terminal poised to continue ramping up and Corpus Christi Stage III expected to follow suit, the balance could tighten further as the winter progresses. Storage inventories have already nearly fully evaporated the surplus to year-ago levels, and current projections show underground stocks falling to a deficit to the five-year average by the end of the season. While there is no real risk of drawing storage down to critically low levels by the spring, the tight fundamentals expected for 2025 may make it difficult to build inventories back to a healthy level throughout next summer. Due to this dynamic, we maintain our bullish stance for Summer 2025 and believe that the premium embedded in Winter 2025-26 is justified.
