Aside from further discounts at Western Lower 48 hubs, natural gas forwards generally gained ground during the Dec. 14-20 trading period as the prospect of chillier conditions arriving in early 2024 lent support to prices.
Fixed prices for January and February delivery rallied week/week at Henry Hub. The January contract at the national benchmark exited the period at $2.452/MMBtu, up 11.0 cents, NGI’s Forward Look data show.
Numerous Lower 48 hubs similarly saw modest fixed price gains for January and February.
Basis Premiums Fade
However, locations trading at basis premiums for the 2024 winter generally struggled to maintain such mark-ups with mild December temperatures erasing weather-driven demand.
This proved especially true for western Lower 48 locations that, feeling the aftershocks of last winter’s regional price spikes, entered the 2023/24 heating season at elevated levels.
Northwest Sumas illustrates what a difference a year can make in the natural gas markets. Spot price highs surpassed $50 on multiple days last December, NGI’s Daily GPI historical data show.
By contrast, the same location logged a December 2023 month-to-date spot low of only 85 cents and as of Thursday had yet to trade north of $5 all month, according to Daily GPI.
Unsurprisingly, Northwest Sumas and other regional hubs continued to shed value for 2024 winter contracts during the Dec. 14-20 trading period even as Henry Hub mounted a modest recovery.
Northwest Sumas January basis dropped to plus-$2.332, down 48.6 cents week/week. Opal front-month basis slid 32.5 cents to plus-$1.298. SoCal Border Avg. ended at a $1.503 premium to Henry, a 16.1-cent swing lower.
This downward move has been a winter-long trend for the West. Since the start of November, in fixed price terms, January contracts throughout the region have lost more than half their value, Forward Look historical data show.
Over on the East Coast, Algonquin Citygate basis also came under downward pressure week/week, giving up 12.0 cents to fall to plus-$7.123. The New England hub was among a number of regional locations to also shed value for the 2024/25 winter, according to Forward Look. For January 2025 delivery, the hub dropped 16.0 cents to end at plus-$9.143.
Congestion Drives Mid-Atlantic Gains
In the Mid-Atlantic, Cove Point and Transco Zone 5 were notable outliers in terms of basis shifts week/week.
Cove Point January basis surged 42.3 cents for the Dec. 14-20 trading period, ending at plus-$3.558. Transco Zone 5 similarly rallied to plus-$3.756 for January, up 42.2 cents.
Last Saturday (Dec. 16), Transco (aka Transcontinental Gas Pipe Line) notified shippers of an unplanned outage at its Station 195 near the Pennsylvania/Maryland border. The outage was expected to impact north-to-south flows. Repairs were completed as of Tuesday, according to the operator.
The strengthening Mid-Atlantic basis also coincided with recent forecasts pointing to chillier conditions developing over the southern Lower 48 for late December into early January.
Forecast maps from Maxar’s Weather Desk as of Thursday projected near to somewhat cooler than normal temperatures over the Southeast and into the Mid-Atlantic for the 11- to 15-day period, from Dec. 31-Jan. 4.
“Above normal temperatures are favored to persist along the Northern Tier, while near normal readings are in the South,” the forecaster said. “...This is a common pattern associated with strong El Niño this time of year, with a continued lack of Arctic blocking” resulting in heating demand levels “on the low side of normal” overall.
Cooler temperatures were expected to develop over parts of the southern Lower 48 late in the six- to 10-day period, starting in the last few days of 2023, according to Maxar.
During the Dec. 14-20 trading period, Transco Zone 4 basis climbed for January and February, picking up 7.3 cents and 6.5 cents week/week, respectively, Forward Look data show.
Futures Rebound?
The relentless descent winter-to-date for Nymex futures had finally begun to show signs of leveling off ahead of the Christmas holiday weekend.
Coming off a larger-than-expected withdrawal in the latest U.S. Energy Information Administration storage report, the January Nymex contract rallied 12.5 cents on Thursday to settle at $2.572.
“Over the next 30-45 days, the prospect of a chillier early January, ebbing supply, strong LNG demand and substantial speculator short exposure collectively suggest that a medium-term turn higher should not be ruled out,” EBW Analytics Group analyst Eli Rubin said in a recent note.
On the other hand, “the enormity of the storage surplus anticipated during the 2024 injection season remains foreboding — and Nymex futures may ultimately return any near-to-medium term gains into the end of winter,” Rubin added.
