Natural gas futures rallied a second straight day, bolstered by cooler trends for the densely populated Northeast, spot market momentum and moderated production.
At A Glance:
- Modest injection expected
- Mixed weather forecasts
- Production remains lower
Coming off a 10.9 cent-gain the prior session, the November Nymex gas futures contract rose another 1.3 cents on Wednesday and settled at $2.962/MMBtu. The front month had topped the $3 level early in the day.
After jumping more than 30 cents over the previous two trading days, NGI’s Spot Gas National Avg. advanced another 20.5 cents on Wednesday to $2.560.
Production held just above 100 Bcf/d on Wednesday, according to Bloomberg’s estimate, on par with earlier in the week amid a spate of maintenance events in the Permian Basin. Output so far in October has been more than 2 Bcf/d lower than the peak level of the summer months.
At the same time, NatGasWeather said Wednesday that forecasts added several degree days, largely because of colder air that is projected to blow into the northeastern United States late this week, creating an early bout of demand for gas to power furnaces. Some heating demand already emerged in the far northern reaches of the Rockies and Upper Midwest early this week after a chilly, rainy system moved into those regions.
Cool weather is expected to hover over the Midwest and push into the Northeast, the firm said, providing a “minor bump” in demand over the coming weekend, though southern portions of the country should experience lighter cooling needs at the same time, the firm said.
“Long-range weather maps show near to warmer versus normal temperatures over most of the U.S. Oct. 19-31 for lighter than normal demand,” NatGasWeather said. However, “the risk is cooler trends show up in time across either the Midwest or Northeast, just as the overnight data showed for early next week and the eight- to 15-day period.”
LNG, Inventory Updates
More LNG demand looms as well, according to EBW Analytics Group. The Cove Point liquefied natural gas export facility in Maryland “may return from its annual outage within the next seven to 10 days – laying the groundwork for a potential rally in mid-to-late month,” EBW’s Eli Rubin, senior analyst, said Wednesday. Cove Point has been sidelined for weeks because of planned fall maintenance.
Additionally, Rubin said, Freeport LNG in Texas requested FERC approval to initiate work to return a second loading dock to service. That dock has been offline since an explosion at the facility in June 2022.
The absence of the second loading dock has impinged operational flexibility at Freeport and kept feed gas roughly 10-20% below its demonstrated capacity, Rubin said. “As the second loading dock is returned to service and temperatures cool seasonally, Freeport feed gas may rise 0.3-0.4 Bcf/d – provided it can avoid the recurring operational problems that have repeatedly ailed the LNG export facility,” he said.
Traders will shift their attention Thursday to the U.S. Energy Information Administration’s (EIA) latest inventory report covering the week ended Sept. 29.
Analysts are looking for a relatively modest storage increase compared with historical builds, with estimates adding to bullish sentiment Wednesday. NGI modeled a 92 Bcf injection for the print. That compares with an increase of 126 Bcf a year earlier and a five-year average of 103 Bcf.
Estimates submitted to Reuters spanned injections of 75 Bcf to 99 Bcf, with a median of 93 Bcf. A Bloomberg poll found a narrower range of 89 Bcf to 99 Bcf and a median of 94 Bcf. The Wall Street Journal’s survey landed at an average increase of 93 Bcf.
EIA reported an injection of 90 Bcf for the week ended Sept. 22, leaving gas in storage at that point at 3,359 Bcf. That was 397 Bcf higher than the comparable week of 2022 and 189 Bcf above the five-year average.
Cash Prices Cruise
Spot gas prices on Wednesday rallied for a third consecutive session as traders focused on the lower production levels and near-term weather conditions.
NatGasWeather said a “system will track through the central U.S. the next few days with showers and highs of 50s-70s, lows of 30s-40s. This system will also sweep through Texas, cooling highs into the 70s-80s.” The firm said “a colder system will follow across the Midwest and Northeast Friday-Monday, with highs of 50s-60s, lows of upper 30s and 40s, although still comfortable most elsewhere with highs of 60s to 80s.”
Chicago Citygate gained 18.0 cents day/day to average $2.595, while Waha in Texas jumped 58.5 cents to $2.460. KRGT Rec Pool in the Rockies advanced 28.0 cents to $2.750.
Prices also spiked in the West, where utilities are dependent on Permian supplies. Maintenance events this week that slowed production in the prolific basin have boosted prices in Arizona and Southern California. SoCal Citygate on Wednesday spiked $1.005 to $7.040.
In the Northeast, however, prices slipped Wednesday ahead of the coming chill. Temperatures in the region were comfortable at midweek. The Northeast Regional Avg. dipped 4.5 cents to $1.820.
Further out, Maxar’s Weather Desk said Wednesday it expects below normal temperatures for the eastern Lower 48 during the six- to 10-day time frame. “The forecast undergoes a mix of changes, with the coasts trending warmer and the Midwest cooler,” the forecaster said.
A storm system expected to track through the eastern half of the country during the six- to 10-day period was “more organized” versus previous forecasts, serving as a “catalyst for changes in today’s 11- to 15-day period,” according to Maxar.
“The forecast is cooler in the wake of the storm system across the eastern half, with temperatures being near normal or slightly below normal,” Maxar said. “This is cooler than the model consensus, but the models may be too warm at the surface given the depth of a trough overhead.”
On the potential hurricane front, AccuWeather said Tropical Storm Philippe continued to trek across the Atlantic and was on a path to the eastern United States.
Alex Sosnowski, AccuWeather senior meteorologist, said the storm was in the eastern Caribbean on Wednesday but could “travel for nearly 2,000 miles to the north, where it could strike Maine with heavy rain, strong winds and storm surge early next week.
“Along its path, impacts will be felt from the eastern Caribbean to Bermuda and eventually Atlantic Canada,” Sosnowski added. “There is the potential for it to take more of a westward jog,” impacting more of New England. “That track will depend on multiple factors, including the orientation of a surge of cool air across the Northeast.”
This could amplify anticipated heating needs in the region.
