The Energy Buyer's Guide | 12.30.2024
January futrures faded into expiration, but February opened this week dramatically higher.
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- Natural gas futures for the remainder of winter finished lower last week, but the market is trading sharply higher this morning in response to colder shifts to near-term weather outlooks
- Northeast markets experienced major increases in spot natural gas and power prices last week, while the rest of the country was relatively quiet
- LNG export demand hit a new weekly record last week, with average feedgas into the nation’s liquefaction terminals coming in near 15 Bcf per day on average
- The 90-Bcf storage draw posted for the week ended December 20 came in just above the year-ago benchmark and lagged the five-year average
Natural gas futures were mixed last week, with balance-of-winter pricing weighed down by significant weakness into the January 2025 NYMEX expiration. That contract traded in a wide range during its final week on the board, pushing as high as $4.010 per MMBtu in overnight trading for Thursday before hitting an intraday low of $3.370 per MMBtu in its final minutes prior to expiration on Friday. The actual settlement price of $3.514 per MMBtu was the highest NYMEX expiration since January 2023, edging out December 2024 by about 8 cents. The February 2025 contract, which is rallying sharply this morning in its first day of trading on the front of the curve, finished only modestly lower last week, while the Summer 2025 strip edged higher. Longer-dated deliveries continue to exhibit strength as well, with market participants building in the risks associated with a tighter fundamental balance for next winter and beyond.
Volatility in the futures market continues to be driven by dramatic changes to near-term temperature outlooks. The winter so far has been defined by short periods of significant cold in key population centers bookended by major warm shifts. However, the current forecast for January shows the strongest and longest-lasting cold snap of the season so far, bolstering expectations for demand during the month. While the January 2025 contract rolled off the board well below its weekly highs, its expiry price still indicated an elevated level of risk for the month. It looked as if February was set to come onto the prompt at a deep discount to the January settlement, but that contract gapped sharply higher overnight and now looks poised to test major psychological resistance at $4.00 per MMBtu.
With frigid temperatures set to impact key areas of the country in the coming weeks and the storage surplus continuing to dwindle, we are shifting our stance back to bullish for the 1-3 month period.
