Cold climates promote short-term profits, but production remains a threat
New cold spells that clean the US are driving increased heating demand, pushing natural gas futures up 2.5% per MMBTU to $3.391. Analysts at EBW Analytics highlight that this combination of supportive weather, storage obstacles and bullish techniques can maintain upward pressure in the short term.
However, rising production levels remain a concern. Over the weekend, US natural gas output crashed into an all-time high, threatening to undermine extended price increases. With winter drawings over, traders are closely monitoring whether the strength of demand can outweigh supply growth.
As stocks run out, gas prices in Europe will skyrocket
Throughout the Atlantic, European natural gas prices have skyrocketed to their highest levels in two years, with the Dutch TTF benchmark jumping to 4.5% per megawatt hour to 58.25 euros. The sudden drop in temperatures in the UK, Germany and France is accelerating withdrawal from storage. This is currently at 49% full.
A concern for European traders is that low storage levels could complicate replenishment efforts ahead of next winter. Gas contracts for summer delivery are now more expensive than winter contracts, limiting the incentives for buyers to store fuel at a lower price. This will help strengthen supply towards colder supply and keep the European gas market volatile.
Large storage draws reflect strong winter demand
According to the EIA, recent cold weather in the US has led to the fourth-largest weekly natural gas withdrawal on record. In stock fell in 321 BC in a week ending January 24th. It was 70% ahead of the average draw over the five-year period.
The South Central region has particularly dropped sharply, with storage levels dropping to 136 BCF, and the Eastern and Midwest also reported double-digit percentage declines. With the January total drawer approaching 1,000 bcf BC, the storage inventory has been flipped over from 6% above the five-year average at the start of the heating season to 4% below that.
