Weather Models On The Horizon Send Relief But Natural Gas Storage On Pace To Finish Above The 5-Year Average
Over the long weekend, we saw a material improvement in the weather forecasts. For those of you wondering why natural gas prices are currently up over ~7%, this is one of the main contributors. In addition, Reuters is reporting Freeport LNG facility is starting to take in gas again. This is not an official restart, but it is a good sign that this much-needed ~2 Bcf/d is coming back soon.
Looking at the latest weather-related demand chart, you can see that the next few days will show the lowest heating demand followed by a gradual incline. By day 6, we should see material coldness return to the Lower 48, and if the current forecast hold, the 10-15 day could provide some excellent demand for the market.
6-10 Day
10-15 Day
15-Day Cluster
But for those following gas closely, the issue with this weather update is that it's just a little bit too late. Even if February weather turns out to be very cold, the impact on storage will be material, but it won't be enough to send natural gas prices skyrocketing higher.
Our latest storage forecast shows ~1.76 Tcf, which will be ~100 Bcf above the 5-year average. ICE is currently showing ~1.8 Tcf as April storage, so the market is already expecting storage to be above the 5-year average. If February turns out to be materially colder than normal, then we see a downside to ~1.5 Tcf, but that's about it. In terms of pricing difference, we could see a glimpse of $5.5+, but that rally will be short-lived.