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NYMEX March gas drops 11.3 cents to settle at seven-week low

Houston (Platts)--9 Feb 2018 320 pm EST/2020 GMT


The NYMEX March natural gas futures contract continued its steady decline Friday, as forecasts of warmer weather and continued strong production weighed heavily on prices.

The March contract settled at $2.584/MMBtu, down 11.3 cents from Thursday's close.

It has been a turbulent couple of weeks for the NYMEX front-month contract, as even in the face of a higher-than-expected storage withdrawal, the price continued to slide, falling to its lowest point since December 21.

Friday's plunge brings the total drop for the front-month contract to $1.047 over the past nine trading sessions, chopping its price 28.5% over that time.

Kyle Cooper, principal at IAF Advisors, blamed Mother Nature for the March contract's woes, as forecasts for warmer weather and robust production have combined to put the "bearish sentiment [in the market] firmly in place."

"The market is counting winter out," he added.

Looking at the most recent six- to 10-day and eight- to 14-day weather outlooks from the US National Weather Service, warmer weather is likely for much of the country, including the Northeast and its population centers of New York City and Boston, likely hindering any sort of demand surge toward mid-February.

Warmer weather is expected to lead to a drop in demand over the next two weeks, with S&P Global Platts Analytics forecasting US demand to average 86.6 Bcf/d through the next 14 days, compared with 97.3 Bcf/d in the previous seven days.

Without the elevated demand seen by much of the US since the beginning of February, strong US dry gas production will have an opportunity to shine over the coming weeks, as S&P Global Platts Analytics data projects US dry production will average 77.6 Bcf/d over the next 14 days, compared with 70.9 Bcf/d in the year-ago period.

If the market is looking for support for prices, it may have to come from increased exports to Mexico or LNG feedgas requirements. So far in 2018, exports to Mexico have averaged 4.4 Bcf/d, compared with 4 Bcf/d the same time a year ago, according to S&P Global Platts Analytics.

The expected addition of the Cove Point LNG facility in the near future could give demand a boost. LNG feedgas demand has averaged 3.2 Bcf/d so far in February, compared with 2.1 Bcf/d in the year-ago period, S&P Global Platts Analytics data showed.

Cooper said some forecasters are calling for a cold snap toward the end of February and beginning of March, which could provide a late-season boost to heating demand before the market rolls into the shoulder season.

The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EST (2400 GMT).

--Eric Janssen, eric.janssen@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com




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