Natural gas futures rocketed to a six-week high midweek amid ongoing heat in Texas, technical support and continued soft production in the wake of pipeline maintenance events. The September Nymex gas futures contract settled Wednesday at $2.959/MMBtu, up 18.2 cents on the day. October climbed 18.9 cents to $3.053.
At A Glance:
- Technical momentum seen for prices
- Storage surplus set to shrink
- Spot gas mostly higher
Spot gas prices also climbed as heat continued unabated across Texas and the greater South Central region. NGI’s Spot Gas National Avg. tacked on 16.5 cents to $2.830.
With cooler trends in the latest weather models, NatGasWeather pointed out that there’s been a change in trader sentiment going back to late last week. Of course, it helps that the upcoming weather pattern is still quite hot for Aug. 13-22, but with the models trending cooler, “some of the extreme bullish luster has been lost,” according to the forecaster.
The midday Global Forecast System held onto the cooler trend, with a weather system seen tracking deeper across the Great Lakes, Ohio Valley and Northeast by the middle of next week. However, heat is forecast before and after this system, so it’s still an overall bullish U.S. pattern going forward, according to NatGasWeather. That said, if sizable cooler trends keep accumulating, especially in the European model, eventually it’s going to matter. The firm sees bulls likely rushing to book profits barring major news that would prevent it.
With gas prices knocking on the door of $3.00, analytics firm Celsius Energy said it’s worth noting that it has been 108 days since Nymex futures last traded above that level – and that was only for a single day on March 3. “This is the fourth longest sub-$3.00/MMBtu streak since 2008, albeit far behind the 2020 bear market.”
EBW Analytics Group added that Nymex futures are getting some support from technical indicators. It noted futures could be poised for further gains as the 20-day moving average pushed above the 100-day moving average. Short-covering amid the steep rally also is powering upside.
“Gas prices could probe higher in the immediate term, with incremental support from a falling storage surplus versus five-year norms,” EBW senior energy analyst Eli Rubin said.
After a string of modest storage injections, traders are looking ahead to Thursday’s Energy Information Administration (EIA) weekly inventory report, where another modest build is expected.
Ahead of the EIA report, which covers the week ending Aug. 4, injection estimates ranged widely from 17 Bcf to 42 Bcf. A Bloomberg survey of analysts produced a range of estimates from 21 Bcf to 31 Bcf, with a median of 23 Bcf. Wall Street Journal’s poll was wider, with projections of 17 Bcf to 39 Bcf and an average build of 24 Bcf. A Reuters survey showed estimates as high as 42 Bcf, with a median increase 23 Bcf.
The wide spread in projections ahead of the EIA report reflects some uncertainty in how fluctuating production, robust power generation demand and lagging LNG demand impact underground supplies. Even with liquefied natural gas export facilities taking in fewer feed gas volumes, the latest storage injections have been modest.
Last week, the EIA reported a 14 Bcf injection into storage for the week ending July 27. That followed a 16 Bcf build in the prior week.
Inventories as of July 28 stood at 3,001 Bcf, which is 550 Bcf above year-earlier levels and 322 Bcf above the five-year average, according to EIA.
Stronger Cash Prices
Spot gas prices continued to move higher on Wednesday, with the majority of U.S. markets following the lead of rising Henry Hub.
With robust cooling demand in play across Louisiana, U.S. benchmark Henry Hub climbed 13.5 cents to $2.905 for Thursday’s gas day. Prices were higher throughout The Boot and across the Southeast, with Floria Gas Zone 3 up 28.5 cents to $3.620.
EBW’s Rubin noted that the physical gas market may be getting some support from restrictions imposed on Natural Gas Pipeline Co. of America. The pipeline on Monday declared a force majeure following issues at Compressor Station (CS) 303 on Segment 26 in Angelina County, TX. NGPL shut CS 303 for repairs after encountering horsepower issues at the station.
Operating capacity southbound from CS 303 to CS 302 at the end of Segment 26 in Montgomery County, TX, must be restricted while repairs are underway. In addition, NGPL would constrain firm transportation East of CS 302 and South of CS 302 to 83% maximum daily quantity until further notice.
While southbound flows are not expected to be restricted given recent flows, eastbound gas from Segment 26 onto Segment 25 is limited to an operational capacity around 998 MDth/d, which cuts around 204,000 Dth/d from Monday’s scheduled volumes, according to Wood Mackenzie.
Elsewhere across the country, Texas spot gas prices picked up north of 20.0 cents at the majority of locations. The same trend played out in the Midcontinent, though smaller price increases were seen in the Northeast.
West Coast prices were a mixed bag, though generally lower on the day. Kingsgate rebounded from Tuesday’s sharp decline, averaging 73.0 cents higher on the day at $2.960.
