Cold weather and a large storage withdrawal that had been anticipated by the market helped Dec. 19 natural gas prices reach a level unseen since January 2023.

Just before 3 p.m. EST, the Henry Hub front-month futures price sat at $3.58/MMbtu, after spending most of the day above $3.50/MMbtu. The price jump followed the U.S. Energy Information Administration’s release of its weekly natural gas storage report.

The report showed that the withdrawal for the week ending Dec. 13 was 125 Bcf of natural gas, slightly smaller than expected.

“Kind of a funny day in trading,” Jack Weixel, senior director at East Daley Analytics, told Hart Energy on Dec. 19. “The storage number came in slightly below consensus, -125 [Bcf] versus -129 [Bcf] and the prompt went up 14 cents.”

Natural gas prices last reached $3.50/MMbtu briefly on Oct. 29, 2023, and spent less than a week above $3. The Henry Hub price last surpassed $3.55 in January 2023.

Analysts said the overall gas market will remain volatile, while the general trends will most likely keep prices above $3/MMbtu for the short-term. Weixel said the price went up primarily due to forecasts indicating that December gas-weighted heating degree days are expected to hit a 10-year average this year.

Gas-weighted heating degree days are a period where cold temperatures hit a part of the country that relies heavily on natural gas to warm houses and businesses. Weixel said there is a risk that over the next eight to 14 days, U.S. temperatures will be well above normal.

“You would think that would put a damper on price, but there are some folks out there betting on a January cold pop following New Years,” he said, adding that prices on Dec. 20 could fall as some investors take profits off of the rally.

Hinds Howard, an analyst with CBRE Investment, added that high natural gas prices can quickly be met with supply boosts, which would cut into the price.

“The history of the last decade or so is that higher prices can be quickly met with higher supply from associated gas or short cycle development in several low cost basins, such that expectations for higher prices are generally not realized in the end,” Howard told Hart Energy via email.

Prices are now driven over short-term events such as weather, LNG outages or LNG start-ups, he said. Operators are likely monitoring the price to determine their next move.

“So, $3.50 natural gas, if it holds, would maybe encourage more development in the Haynesville and Marcellus, where rig activity has slowed in recent years on lower prices,” Howard said.

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