Gasping on its final day as the lead contract, September Nymex natural gas futures pushed back against early losses to a $1.856/MMBtu low and rolled off the board with a gain.
At A Glance:
- Futures up as September expires
- Bullish storage print eyed
- Fundamentals still bearish
The September contract settled at $1.930, up 2.6 cents on the day. October futures, which takes over as the prompt month Thursday, added 1.2 cents to settle at $2.097.
NGI’s Spot Gas National Avg. was $1.305, off 22.0 cents as the market looked ahead to fall.
Confirmation of a false alarm at the Freeport LNG facility in Texas supported modest gains by negating concerns about a possible outage. The liquefied natural gas facility was shuttered unexpectedly early Wednesday, a spokesperson for the facility confirmed.
A fire safety suppression system in the control room of the pretreatment facility unexpectedly activated during routine maintenance. “There was no active fire and no threat to the surrounding community,” the spokesperson said. But safety protocols forced the facility to shut immediately. “We are actively working towards reestablishing operations.”
LNG feed gas deliveries of 12.81 Bcf Wednesday slipped day/day from 12.95 Bcf, NGI’s U.S. LNG Export Flow Tracker showed.
Meanwhile, producers who had signaled possible curtailments through the fall bumped up output to a seven-day average of 102.0 Bcf/d, Wood Mackenzie data showed. The increase was in response to demand, up across the Lower 48, which averaged 103.5 Bcf/d over the same period.
A day of record heat was expected to impact the Mid-Atlantic states Wednesday, with some high temperatures reaching 100 degrees, the National Weather Service (NWS) said. Expectations were for the heat to vacate the region quickly, while the Ohio and Tennessee Valleys were forecast to see temperatures in the upper 90s holding for “a couple more days.” In contrast, a strong cold front marching across the northern Rockies was expected to bring the first snowflakes of the season to high elevations of northwest Montana.
“Still, today’s peak cooling degree day (CDD) forecast is about 6% below early-week forecasts and represents summer’s swan song before demand could sink by nearly 6 CDDs into Labor Day Monday,” EBW Analytics Group senior analyst Eli Rubin said.
NatGasWeather said Wednesday’s American weather model erased 8 CDDs added in the prior forecast. National demand was expected to ease for the five- to 15-day period because of milder weather in the country’s northern half and a slightly cooler Texas. The country’s southern half was expected to remain very warm. However, national demand forecasts were lighter due to “considerably less coverage of highs into the 90s,” the firm said.
Attention was training toward Thursday’s release of storage data by the U.S. Energy Information Administration (EIA) for the week ended Aug. 23. NGI modeled a build of 34 Bcf. That compares with a five-year average increase of 43 Bcf. A Reuters survey found estimates ranged from injections of 28 Bcf to 55 Bcf, with a median increase of 38 Bcf.
A bullish print could support October futures higher in its debut as the lead contract. But bullish factors have not been having an impact lately, R.J. O’Brien & Associates senior analyst Tom Pawlicki told NGI. He said that despite the recent inventory drawdowns and tightening surplus to the five-year average, “inventories could end the injection season at the highest level in EIA data going back 15 years.”
EIA reported a 35 Bcf injection for the week ended Aug. 16. It increased inventories to 3,299 Bcf and kept stocks 13% above the five-year average.
Weakness Persists
Further, Pawlicki noted, “It looks like the cooling demand that the National Oceanic and Atmospheric Administration was projecting in its seasonal temperature outlooks has not lived up to the hype.” He noted the same could be said for the hurricane forecasts, which suggested that this year would be one of the most active on record.
Thus far in the Atlantic hurricane season (June-November), five named storms and three hurricanes have been recorded. Hurricanes Beryl and Debby were the only two to hit the United States mainland. Statistically, peak activity begins in September. On Wednesday, the National Hurricane Center (NHC) was tracking two disturbances in the Atlantic with little to no chance of development through the next seven days.
The Eyewall’s meteorologist Matt Lanza said, “Support for any development of the tropical wave moving into the islands next week seems to have ebbed a good bit.” The NHC still gave the system a 20% chance of development, “but model support seems to have peaked.”
“That said, with slower development chances, this means the system may wait til it gets into the Caribbean to organize,” Lanza said. He also noted that tropical development may not necessarily be likely, but there was a “very real possibility” over the next five or so days off the Texas coast.
Tropical storms and hurricanes have generally become demand-drenching events that support bearish market sentiment.
That said, Pawlicki said, “The only upside going for the market now seems to be the technical support from the March and April highs around $1.95-$2.00.” He cautioned that looking for a sustained rebound from that level “appears to be a difficult thing to do after the bearish price action this summer.”
Spot Tumbles
With ample supply available to meet the projected load, physical prices were lower as the market focused on an impending cooldown.
Temperatures already a few degrees cooler in Texas signaled sharp losses at hubs across the state. Transwestern averaged negative $4.265, off $2.565 day/day. Waha followed, sinking $2.185 to negative $3.670. NGPL TexOk at $1.540, fell 12.0 cents, while NGPL S. TX slipped 10.5 cents to $1.605.
NWS forecasts for the Northeast showed highs falling from the low 80s to the low 70s. On the cooldown, Transco Zone 6 NY slid 37.5 cents to an average of $1.425. Transco Zone 6 non-NY, at $1.420, was 32.0 cents lower on the day.
