Natural Gas Price Fundamental Daily Forecast – Short-Term Cold Supportive, but Two-Week Forecast Caps Gains

Natural gas futures are trading higher shortly after the regular session opening on Tuesday as traders reacted to a drop in production after cold weather froze some production wells in Texas, New Mexico and Colorado. The news served as a reminder that it’s still winter and temperatures can turn cold quickly following one of the warmest December’s on record.

At 13:21 GMT, March natural gas futures are trading $3.721, up $0.043 or +1.17%.

Traders were also reminded of the tragic events from last February when brutal winter storm Uri killed more than 100 people and left around 4.5 million Texas homes and businesses without power and heat – some for days – after gas pipes and power plants froze.

The cold temperatures over the New Year’s weekend, however, didn’t come close to the extremely low temperatures from last February’s freeze. Well freeze-offs occur whenever temperatures drop enough to freeze water and other liquids in a well or pipe and halt production.

Gas output in the U.S. Lower 48 states fell to an average of 94.8 billion cubic feet per day (bcfd) so far in January from a record 97.6 bcfd in December, according to Refinitiv data.

Gas Prices Surge in Europe over Tight Russian Supplies

U.S. natural gas is also garnering support from a jump in overseas prices. European gas prices soared more than 30% on Tuesday as low supplies from Russia reignited concerns about an energy crunch as the region heads for colder weather, Reuters reported.

A key pipeline which normally delivers gas from Siberia to Europe continued to work in reverse on Tuesday, traders said, sending flows from Germany to Poland, while supplies of Russian gas from Ukraine to Slovakia were also subdued.

Gas flows via the Yamal-Europe pipeline, which usually sends Russian gas west into Europe, jumped on Tuesday in the eastwards direction, data from German network operator Gascade showed, with gas flowing from Germany to Poland for a 15^th straight day.

Short-Term Outlook

Expectations for colder weather in Europe were contributing to upward pressure on prices, but the low Russian gas flows were the key driver, a trader said.

U.S. traders are also assessing the bearish U.S. weather outlook against strong demand prospects for U.S. liquefied natural gas (LNG) exports.

Short-term the weather outlook is supportive, but the forecast turns bearish early next week. NatGasWeather expects “the strongest demand so far this winter season early and late this week” as frigid weather systems sweep across the northern United States.  But the back half of the two-week forecast is “where the weakness showed up most strongly in the recent model runs,” Bespoke said.

Meanwhile, European demand for U.S. LNG exports proved robust over the past week and is expected to remain so through the winter.