Natural gas forwards ran higher from January 26 to February 26. 2 trading period as expectations of substantial cold in February fueled market unease over the prospect of further depletion of storage stocks in the final months of the withdrawal season.

According to NGI Future Prospects. The national benchmark set the tone for large-scale fixed price gains of around $1,500 across most lower 48 hubs.

Forward movements during January-February 26. Period 2 showed traders pricing in additional late winter weather risk, as basis premiums swelled in a handful of demand centers along the northern Lower 48.

[Actionable Insight: Did you know that NGI is one of only two Price Reporting Agencies that include trade data from the Intercontinental Exchange. Find out more.]

In New England, the Tennessee Area 6 200L March base rose to a premium of $8.557 for Henry Hub, up $2.733 for the period. In the Midwest, Emerson’s monthly basis gained 16.7 cents to end the period plus-22.1 cents.

It was a different story, however, for the Lower 48 West, where the base eroded for Jan-Feb 26. 2 period.

SoCal base Citygate March ended the period plus-30.1 cents, down 16.7 cents, while Northwest Sumas ended 58.6 cents discount to Henry, a base drop of 21 .9 cents.

Freeze-Offs and Frenzied Futures

Whipsawing Nymex futures, meanwhile, fell 61.3 cents to settle at $4.888 in Thursday’s session, conceding most of the gains recorded a day earlier when the month’s fast topped 5 $500. The bleeding continued in Friday’s session as the March contract fell another 31.6 cents to settle at $4.572..

The February forecast continued to be the focus of natural gas traders over the period. Wednesday’s explosive rally coincided with models exhibiting a frosty pattern likely to draw more into stocks, leaving the market in a less comfortable position heading into injection season.

However, the price action to close out the work week highlighted the natural gas market’s propensity to shoot up.

The latest data from the Global Forecast System at noon on Thursday confirmed warmer trends overnight, according to NatGasWeather.

The latest model also trended “a little warmer Feb. 10-13 by not seeing as much below freezing air in the northern United States,” the company said. “However, the end of the last GFS caused ‘heating demand for the February 14-17 period to fall back,’ suggesting a return to strong national demand for mid-February.”

Thursday’s selloff may also come from signs of stronger wind production in Texas than previously forecast, “giving the energy grid more juice to combat the current Arctic front running through” the state, the state said. company.

Assuming weather patterns are the primary driver, “the wickedness of the decline is impressive,” NatGasWeather said. Still, “this shouldn’t come as too much of a surprise since that’s what natural gas markets do best – rise sharply to one side and expand farther than many realize.”

EBW Analytics Group Senior Analyst Eli Rubin pointed to the prospect of frosts amid the cold weather arriving during the week as a key driver of the market’s initial rise.

Going back to February’s contract rally until its expiration a week earlier, weather trends and the potential for cold-related supply disruptions served to “deepen anticipated storage shortfalls.”

“Bullish weather changes and weakening supply have tightened the outlook for the remainder of 2022,” Rubin said. The possibility that the storage shortfall from the five-year average will widen to more than 400 billion cubic feet has prevented the steeper price declines “expected earlier this winter.”

The Energy Information Administration’s (EIA) latest storage report on Thursday missed the bearish side of the consensus, landing at a pullback of 268 billion cubic feet for the week ended Jan. 28. The attraction still easily exceeded the five-year average withdrawal of 150 billion cubic feet. Inventories ended the period at 2.323 billion cubic feet, a 5.8% shortfall from the five-year average, according to the EIA.

Snob MVP?

While much of the market remains focused on the current heating season, recent setbacks at the Appalachia-to-Southeast Mountain Valley Pipeline LLC could have major implications for Appalachia prices as winter approaches. next.

On January 25, the United States Court of Appeals for the Fourth Circuit reversed and returned key permits reissued to the MVP for 2 million Dth/d to cross a 3.5 mile stretch of the Jefferson National Forest on along the Virginia-West Virginia border.

Raising further doubts about the timely start-up of the oft-delayed but substantially constructed pipeline, the Fourth Circuit later revoked MVP’s Endangered Species Act clearance.

MVP developers were aiming for a summer 2022 start for the beleaguered project, which had to follow a redesigned permitting pathway in hopes of getting construction across the finish line.

In a research blog published after the Fourth Circuit’s decision to reject National Forest crossing permits, RBN Energy LLC’s Sheetal Nasta called a 2022 commissioning for the embattled natural gas conduit highly questionable.

As a major take-out project, MVP’s capacity would help defer “severe constraints” on Appalachian Basin releases “a little longer, especially as regional production hits new highs this year.” , according to the analyst.

“Even with MVP going live this summer, severe on-the-go constraints and base blowouts on a seasonal basis were inevitable over the next two years,” Nasta said. “Without the 2 Bcf/d of MVP capacity in 2022, these disruptions are now more imminent. As in, we might get an advanced projection this fall.

As for what regional prices might look like in the future, Nasta cited October 2016 as a useful comparison. At that time, the base at Eastern Gas South – Dominion South at the time – averaged close to a $2 discount from Henry Hub because “there was less than 1 Bcf/d of output capacity from reserve and storage inventories were particularly high,” the analyst said. .For October 2022, the Eastern Gas South basis fell from minus $1,466 to minus $2,011 between January 26 and February 2. Look forward data exposure.