Natural gas rides colder temps towards robust demand

US winter temperatures have arrived, promoting high demand, and supporting natural gas prices.

Natural gas trading

US demand picks up as temperatures drop

Natural gas consumption and demand is proving robust in the United States right now.

Winter has finally come – but bulls will need colder temps to extend into February in order to get a real run going.

As it stands, Natural gas prices gained 0.6% on Monday 17^th January and continued to grow into Tuesday. On Tuesday 18^th, prices were up 1.51% on the day.

Henry Hub futures were trading for around $4.318, testing resistance. Support is thought to lie around the $4.110 region.

Weather has been colder across the US over the past two weeks. We’ve seen that have a positive impact on natural gas.

On Friday 14^th, for example, prices peaked over $4.800, before pulling back over the weekend.

US gas consumption rose 21.8% over the past fortnight too.

Heating demand is expected to rise across the continental United States as January progresses – but traders will be keeping a close eye on forecasts going forward. February will be a crucial month for Henry Hub traders. Will the cold weather stay put?

Looking to the shorter term, Natural Gas Weather says:

“Demand will ease to Tue-Wed as a mild break holds across most of the US with highs of 40s to 70s besides the colder Upper Midwest and New England where frosty air lingers w/highs of 10s to 30s.

“National demand will surge Thu-Sat as a frigid Arctic blast advances across the Midwest and eastern US with snow and lows of -20s to 20s for very strong demand, aided by lows of 20s and 30s into the southern US.

“National demand will briefly ease late this coming weekend before another Arctic blast follows. Overall, national demand will be MODERATE Tue-Wed, then HIGH-VERY HIGH Thu-Sat.”

Woodmac predicts resilient 2022 nat gas demand

Wood Mackenzie has released its 2022 Global Gas & LNG report and it’s predicting a solid year for natural gas.

In the short-to-mid-term, demand will stay resilient with little signs of demand degradation.

Asian gas demand is forecast to remain high. This opens up plenty of export opportunities for American LNG. However, current contracts are being traded using pricing tied to legacy oil-indexed contracts, meaning Asian LNG futures are trading for less than half of spot prices.

Good news in the short term of Asia’s many LNG buyers, but prices could rise leading to a fall in demand. Asian consumers may wish to switch to more affordable energy sources, so don’t discount coal.

In Europe, the situation would be dependent on the commission of Nord Stream II. Much of this is political posturing between the EU and Russia, but Russia really holds all the cards in terms of European gas inflows. However, a war in Ukraine would put pressure on supplies and prices.

EU nations are also expected to move away from natural gas in 2022. Cleaner, greener energy sources are what the European Union is looking for. Expect heavy renewables investment.

US records highest gas drawdown of the winter so far

The US has also reported its highest natural gas drawdown of the winter so far according to EIA data.

Working gas in storage was 3,016 Bcf in the week ending January 7th. This represents a net decrease of 179 Bcf from the previous week.

Stocks were 199 Bcf less than last year at this time and 72 Bcf above the five-year average of 2,944 Bcf. At 3,016 Bcf, total working gas is within the five-year historical range.

A new EIA natural gas inventories report will be released on Thursday January 20^th.