NatGas snaps back with 8% rally as storage draw more than doubles on week

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By Barani Krishnan

AiVIF.com -- The Bucking Bronco that’s natural gas proved it couldn’t be otherwise as the market jumped 8% Thursday with a rally that more than made up for everything lost in the previous session.

“Talk about a counterintuitive trading day,” Houston-based consultancy Gelber & Associates said as gas futures on the New York Mercantile Exchange’s Henry Hub again hit a session high of $7 per mmBtu, or million British thermal units, after a strong weekly drawdown in gas inventories amid expectations for another cold week ahead.

At the close, natural gas for January delivery was up 54 cents, or 8.4%, to settle at $6.97. That was a tad higher than the previous session’s drop of 50.5 cents, or 7.3%.

The snapback in gas prices came as the Energy Information Administration, or EIA, reported that utilities pulled 50 billion cubic feet, or bcf, from storage last week. That was more than double the previous week’s draw of 21 bcf, even with heating demand indicated to be less cold than normal for this time of year.

Analysts tracked by AiVIF.com had anticipated a draw of 45 bcf from storage during the week ended Dec. 9. In the prior week to Dec. 2, the drawdown was 21 bcf.

There were around 137 actual heating degree days, or HDDs, last week, lower than the 30-year normal of 160 HDDs for the period, according to Reuters-associated data provider Refinitiv.

HDDs, which are used to estimate demand to heat homes and businesses, measure the number of degrees a day's average temperature is below 65 Fahrenheit (18 Celsius).

“It was warmer than normal over most of the U.S. besides the cold Northern Plains, Northwest and Northern Rockies,” NatGasWeather said, commenting on the EIA report.

Also Thursday’s session high of $7.03, which came below Wednesday’s top of $7.10, suggests the market volatility in gas might not settle yet, as Gelber noted a “lack of interested buyers to take prices higher” than the weekly top.

Prior to Wednesday’s tumble, the Henry Hub moved almost one way over five sessions, gaining nearly 30%, on expectations of a looming polar vortex.

The oncoming Arctic winter blast had been projected to be the coldest for a December since 2010. For the record, the last polar vortex occurred in 2014. Weather records show similar cold outbreaks prior to that, including several notable freezes in 1977, 1982, 1985 and 1989.

But a revision in weather reading models on Wednesday caused the 5-day rally to unravel. Prior to that, the U.S. Global Forecast System, or GFS, and the European model ECMWF had persistently shown the potential for a near-record cold period to last through the end of 2022.