Natural gas futures moved lower ahead of the December contract rolling off at the end of trading Tuesday, weighed down by weather forecasts doubling down on a bearishly warm early December and gas production holding near all-time highs.
At A Glance:
- December Nymex rolls off
- NGI’s National Avg up to $3.745
- Southeast leads cash gains
The December Nymex natural gas futures contract settled at $2.706/MMBtu, down 8.8 cents day/day. The January contract, which moves to the front of the curve on Wednesday, fell 10.9 cents to $2.837.
In contrast, this week’s blast of cold sent overall physical markets higher. NGI’s Spot Gas National Avg. rose 2.5 cents to $3.745 as small and moderate declines in the Midwest and Appalachia were offset by a big jump in Southeast prices and gains in California, the Rockies and Northeast.
Cash prices soared Monday for deliveries on Tuesday, which “may be the coldest day for the rest of 2023,” as one weather model suggested, said EBW Analytics Group analyst Eli Rubin. The upturn in physical spot prices “may prove brief” as the cold weather wanes and gas demand drops by 15 Bcf/d into next week, he said.
Looking ahead, weather models continue to point to a significant warm-up in temperatures starting late this week and stretching into the second week of December, NatGasWeather said. “Overall, weather patterns are viewed as bullish the next two days but solidly bearish Dec 2-11,” the firm said.
The warm-up should begin late this week and gain steam next week “as highs across the northern United States warm into the 40s and 50s and with little coverage of highs of 20s or 30s,” according to NatGasWeather. “In southern states, highs will reach into the mid-50s to 70s with some areas in the 80s.”
Along with the waning weather-driven demand support, Rubin added that “the tidal wave of supply growth” could create renewed downward pressure for natural gas over the next 7-10 days.
Pipeline nominations on Monday were revised higher by around 1.8 Bcf/d, with changes concentrated in the Permian Basin’s New Mexico region, Wood Mackenzie analyst Laura Munder said.
As a result, Tuesday’s production dropped to 104.3 Bcf/d from the revised 106.0 Bcf/d total from a day earlier. The decline gave bulls little to work with because further revisions could undo some of the day/day drop.
“Day/day declines are concentrated in Texas and the Northeast, but revisions are expected in later cycles,” Munder said.
Outages Ups and Downs
The revisions aside, a bevy of maintenance projects ramping down and up are affecting gas flows.
Work to restore the Permian Highway Pipeline LLC (PHP) flows back to full capacity was set to be wrapped up before Tuesday. A leak discovered Sunday on a mainline compressor station in McCamey, TX, shut in 505 MMcf/d of interstate deliveries.
Early nominations for Tuesday showed Texas flows down around 790 MMcf/d day/day, with the eastern portion of the state down around 430 MMcf/d and the Permian down around 270 MMcf/d, Munder said. In the East, the Gulf South Pipeline’s planned work on the Index 817 pipeline scheduled from Monday to Friday could restrict around 485 MMcf/d of flows through the Hall Summit East compressor group, the analyst said.
Permian production was also down at processing plants along the El Paso Natural Gas Co. (EPNG) pipeline, where work was scheduled until Thursday, according to Munder.
In the Southeast, the ANR Pipeline Company’s planned maintenance at the Mermentau compressor station in Louisiana could reduce southbound flows by more than 400 MMcf/d, the analyst said. Meanwhile, in Ohio, Nexus Gas Transmission LLC was scheduled to perform maintenance at its Clyde compressor station from Tuesday to Wednesday, which could reduce westbound flows by around 229 MMcf/d, according to Munder.
Southeast Prices Jump
Next-day cash prices on Tuesday leaped for a second day in the Southeast, while prices modestly pulled back across the country’s midsection, Appalachia and Texas.
National Weather Service (NWS) forecasts indicate temperatures in the 30s might be felt as far south as Alabama, Georgia and northern Florida on Wednesday, with areas further south like Orlando and Tampa dipping into the upper 40s.
As a result, the Southeast Regional Avg. jumped by $1.040 day/day to an average $4.745. Transco Zone 5 again was a top gainer, up $2.980 to $8.400. This is up from an average $2.750 at the end of trading last week.
Following behind, the Rockies and California regional averages registered modest gains. West Texas prices fell slightly, but some of its prices were supported by PHP flows returning to normal westward out of the Permian. Waha rose 14.0 cents to $1.605. Declines were intermixed across the other two regions as well. Stanfield in the Rockies, for example, fell 15.0 cents to $5.925.
Modest drops were also seen across South and East Texas, the Midwest and Midcontinent. Chicago Citygate shed 9.5 cents to $2.625.
Against the downtrend, some hubs continued to make strong gains. Algonquin Citygate rose $1.330 to $10.155.
NWS said lake-effect snow downwind of Lake Erie and Lake Ontario was expected to be seen into early Wednesday, with accumulations of as much as four to eight inches. Meanwhile, below-normal temperatures across the South led to freeze warnings for Tuesday night across portions of the central Gulf Coast from the Florida Panhandle to South Carolina’s coast. In these areas, temperatures could fall into the mid-to-upper 20s inland and low 30s along the coast, NWS said.
