A 2017 Natural Gas Recap

The February natural gas contract settled at $2.953 on the final trading day of the year, capping off another exciting year of trading. That comes in 79.1 cents below the last settle of 2016, or a fall of 21.1% on the year (though a large chunk of that selling came in the first few days of 2017). As shown below, we helped clients navigate a number of weather-driven phenomena in the natural gas market, as prices spent quite a bit of time between $2.8-$3.2, a range we end the year back within. 

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We closed out the year with easily the most elevated cash prices of the past 6 months, as early January prices put quite a bid under Henry Hub cash today. 

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The cash midpoint Friday was the highest of any prompt month future settle this year as well. 

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Through the year the natural gas market had to deal with weather that was often far from supportive. A record warm February pushed prices down from the start, and a relatively mild late-summer did little to make up the difference. Some late-winter cold helped, but we are still going to end 2017 with fewer GWDDs than in 2016 and even fewer than the climate and 5-year average. 

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Yet it was not just weather that hurt prices. Late in 2017 we saw production surge steadily ahead, dramatically loosening the market. 

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This helped allow for an extremely anomalous and loose late November/early December storage injection. 

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Such a loose print was aided by a delay in December cold that we had been forecasting since some of our first Seasonal Trader Reports back in September. And despite some volatility between months, our overall GWDD forecast from then for 2017 GWDDs to come in just slightly below last year's level looks to verify well. 

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Attention now turns to 2018, where we see conflicting signals between limited stockpiles raising concerns about gas shortages before the end of winter and elevated production seemingly alleviating those same concerns. Yet expectations that cold would be a bit more sustained into January and more gas would be pulled from storage clearly spiked prices and the March/April H/J spread the last few days. 

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It should be an exciting early next week for gas traders, as we see weather being especially important to this market and significantly driving price action next week when traders return.