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First Look - Appalachian gas prices see strong improvement

Oil is higher today, ahead of expiry
- The January WTI contract rolls off today
- Yesterday, the Federal Reserve cut interest rates by 25bps; however, it signaled a more cautious approach in 2025, pushing the US dollar to its strongest level in two years
- A Russian refinery was struck by a Ukrainian drone overnight
China's gasoline demand to keep falling, according to Sinopec
- China's largest oil refiner said the country's gasoline demand peaked in 2023, with declines expected to accelerate due to higher EV adoption
- The latest outlook reiterates a forecast from last year, which called for Chinese oil demand to peak no later than 2027
- Petrochemical demand is expected to cushion declines from transportation fuels, and refiners may have to focus on lifting chemical yields
- China National Petroleum Corp sees the country's oil demand peaking sooner, potentially in 2025

The January natural gas contract moved higher by 11c Thursday morning to $3.48 (7:58 AM) despite the final week of December forecast to be the third warmest on record
- Before the roasting of the end of December, a strong but brief cold event will be focused on the East Coast this weekend for the coldest weather so far this winter there (CWG)
Today’s storage report from the EIA is expected to show another triple-digit withdrawal from underground inventories
- Analysts surveyed expect a 126 Bcf draw (BBG)
- If confirmed, today’s pull would shrink the surplus to the five-year average by 34 Bcf
Regional gas prices in Appalachia have seen strong improvement
- Eastern Gas South Basis (fka Dom South) has rallied to -$0.41 for the January contract, up from -50c to start the month and -60c in early November
- The addition of the Mountain Valley Pipeline (MVP) has helped ease gas takeaway pressure, along with producer supply restraint
- MVP has been flowing about 1.7 Bcf/d into the Transco mainline recently
- AEGIS notes that the price appreciation isn’t isolated only to the January contract. Both Cal 2025 and Cal 2026 for Dom South are near multi-year highs, making them the best hedgable value in some time