US Natural Gas Analysis – January-15-2024

In recent times, US natural gas prices soared, hitting nearly $3.2 per MMBtu. This sharp increase, over 9.5% in just a week, stems from two main factors. First, there’s been a significant withdrawal from natural gas storage, more extensive than initially expected. Secondly, an extreme cold wave is hitting parts of North America, pushing the demand for gas to unprecedented levels.

The Impact of Extreme Cold on Gas Demand

A severe Arctic cold front is sweeping North America, bringing record-breaking low temperatures. Cities like Chicago are bracing for temperatures below -10F, while Oklahoma City might see the mercury drop below 0F. The situation is even more intense in the Rockies, with expected wind chills hitting a staggering -30F. This fierce cold is uncomfortable and sets the stage for weather-related disruptions, including snowstorms, sleet, and rain.

Challenges in Natural Gas Production and Storage

This extreme weather is more than just increasing demand; it also impacts gas production. The freezing temperatures will likely affect infrastructure, potentially hindering natural gas production. In a recent week, US utilities extracted 140 billion cubic feet of gas from storage, more than the market had anticipated, indicating a 119 bcf decline. Although this trend seems optimistic, it’s important to note that gas storage levels are still 11.6% above the seasonal average. Adding to the complexity, meteorologists predict a warmer spell in the US from Jan. 22-26, which could impact gas demand and prices.

NATGAS Analysis 4-Hour Chart