No marmot was needed to convince natural gas traders that Old Man Winter planned to stay in the United States longer. A biting February forecast combined with steep storage cuts, potential supply disruptions and robust export demand to push March Nymex natural gas futures higher to $5.501/MMBtu on Wednesday, higher of 75.0 cents on the day. April jumped 47.1 cents to $5,044.

In short :

Gas spot action was similarly volatile as intense heating demand was seen across the eastern half of the country over the next several days as temperatures plummet. Silver jumped over $1.00 in most places, with NGI’s Spot Gas National Avg. up to $1,315 to $7,440.

The biting cold spell lasting several days arrived in the central United States in the middle of the week, ushering in heavy snowfall that is expected to extend from the southern Rockies to northern New England eventually, according to the National Weather Service. Heavy ice accumulation was likely from Texas to Pennsylvania.

Uri’s Scare

Although the approaching first anniversary of the Uri winter storm may cause nervousness in Texas, Bespoke Weather Services said the threat of widespread power outages amid freezing weather was not to blame for the monstrous gathering of Wednesday.

Instead, it’s “the fact that we’re seriously reducing storage levels,” Bespoke said. “And more cold weather will only exacerbate this problem, making it more difficult to fill to comfortable levels by the end of injection season.”

Government inventory reports have shown a steepening decline in recent weeks due to freezing weather for most of January. The Energy Information Administration (EIA), due to release its next report at 10:30 a.m. ET Thursday, reported a shrinkage of at least 200 billion cubic feet in each of the past three weeks. Another pull of over 200 billion cubic feet is expected for Thursday.

A Bloomberg survey of eight analysts produced a range of estimates from 263 billion cubic feet to 292 billion cubic feet, with a median of 280 billion cubic feet. A the wall street journal had the same range of projections and landed at an average drop of 267 billion cubic feet. A Reuters poll was wider with a low estimate of 232 billion cubic feet, a high of 297 billion cubic feet and a median of 277 billion cubic feet. NGI modeled a pull of 286 Bcf.

That would easily squash the EIA’s 183 billion cubic feet shrinkage in the same week last year and the five-year average of 150 billion cubic feet.

EBW Analytics Group noted that salt storage operators injecting gas before the Polar Blast helped support near-term spot market prices. Last week’s dramatic February price spike in final settlement, the company said, likely prompted some salt storage operators to sell futures and buy physical gas to capture similarly dramatic gains.

Meanwhile, traders eyeing the potential for explosive spot price prints amid increased demand in the south-central region were pumping gas to boost supplies available to sell at potentially higher prices later this week. .

Why are there short-term one-off purchases?

“This short-term buying in the spot market is helping to support high Nymex futures prices – but could also reverse lower as the salts increasingly reduce supply to meet high demand” , said Eli Rubin, principal analyst of EBW.

Freezing weather and frenzied demand aside, Bespoke said Wednesday’s rally also had the makings of short pressure against traders who were short the March-April spread.

The company said “the March contract was a ton larger than any other contract on set, to a degree that seems a little odd.” Bespoke noted that “it’s very hard to have concerns about cold enough in March to risk a big cash blowout, unless we have the risk of running out of gas, which we don’t. not”.

While colder temperatures would actually be bullish, according to Bespoke, any support for March would continue into April – and the rest of calendar year 2022. The question may be how difficult it is to top up storage at acceptable levels by the end of this injection season of the year.

Skyrocketing liquidity

Spot gas prices rose across the country, with steep premiums in place for Thursday’s gas delivery amid an Arctic front aimed at the central United States.

AccuWeather forecasters said the polar blast would plunge into Texas on Wednesday night and Thursday. The storm is then expected to combine with a surge of moisture from the Gulf of Mexico and bring heavy rains to the Mississippi Valley. Through Friday, steady rain is expected to spread from eastern Texas to southern West Virginia, with a risk of ice forming overnight.

Overnight Wednesday and Thursday ice accumulations of 0.10 to 0.25 inches were likely from northeast Texas to central New York. Higher amounts of up to half an inch of ice could occur from southeast Oklahoma to northwest Pennsylvania.

AccuWeather said the biting conditions could challenge the Texas power grid, but the scale of the cold blast would not be as severe as last February’s winter storm Uri. That cold blast was expected to dissipate after three days, while Uri lasted a week, forecasters said.

“Temperatures will be 20 to 30 degrees below average at worst, down from 35 to 5 degrees below average in 2021,” AccuWeather said. “Instead of Dallas having three nights below 10 degrees, it’s predicted to drop in mid-teens for just two nights.”

The Electric Reliability Council of Texas, which serves 90% of the state, said it was using “every tool available to effectively manage the grid during this winter weather.” Acting CEO Brad Jones said the network operator would “deploy all resources and aggressively implement the tools available to us” to reliably manage the network during the weather event.

“We will continue to coordinate closely with the Texas Division of Emergency Management, Public Utilities Commission, Railroad Commission and elected officials – as well as electric generators and transmission and distribution utilities – to keep Texans informed throughout the week,” he said.

Jones warned that while network conditions “remain strong with sufficient capacity, our weather forecast shows there is potential for significant frozen precipitation behind this week’s cold front. With frozen precipitation, there is still a risk of local outages caused by things like ice on wires or fallen tree branches.

With demand accelerating before the storm, spot gas prices in East Texas have risen in some places. Tolar Hub climbed $6,310 to average $11,650 for Thursday’s gas day. South Texas prices were in the $6.00 range, while West Texas prices climbed near $8.00.

Much of the Midwest and Midcontinent costs between $5.00 and $7.00. Defiance rose 85.5 cents to $5,995 and Southern Star rose $1,265 to $7,045.

West Coast locations posted stronger increases in some regions as demand centers scrambled to find molecules to meet robust demand. Several locations saw average prices above $8.00, while SoCal Citygate climbed $2,710 to an average of $8,775.

Meanwhile, Colorado Interstate Gas (CIG) announced a force majeure event at its Fort Morgan storage field beginning Tuesday until further notice. Wood Mackenzie said Available Daily Withdrawal Quantities (ADWQ) could be reduced by up to 35%.

In the advisory, CIG acknowledged that the event could impact the ability of no-notice transmission customers to withdraw gas Tuesday through Thursday (February 1-3) as cold weather forecasts for areas delivery have increased system demand.

Based on the percentage reductions in ADWQ and available withdrawal capacity at the time of the advisory, these reductions would be equivalent to limiting available withdrawal volumes by approximately 85 MMcf/d, according to Wood Mackenzie. Given the approximately 243 MMcf/d withdrawal capacity of the storage field, this would imply approximately 158 MMcf/d of available withdrawal volumes.

“Given that the facility’s last 30-day maximum withdrawals were only slightly over 20MMcf, actual reductions in withdrawals are unlikely, or will be minimal at best,” Wood analyst Quinn Schulz said. Mackenzie.