Natural gas forwards slipped at the front of the curve for most locations alongside trimmed demand expectations for September, while hubs in Canada posted gains ahead of the nation’s first LNG export terminal.
September fixed prices for the benchmark Henry Hub finished down 12.3 cents during the Aug. 22-28 trading period at $1.933/MMBtu, according to NGI’s Forward Look. That was in line with an overall trend lower with September fixed price forwards down by an average 9.8 cents.
In fixed price trade, the biggest declines were in California, the East and in West Texas. On the other end of the spectrum, a handful of hubs in Appalachia and Northeast joined Canadian forwards moving higher for September.
Weather forecasts for September have pared back expectations for an extended summer so much that the month is now trending to be one of the coolest in more than a decade, according to DTN. The forecaster’s outlook pointed to extended warmth in the West and seasonally cool temperatures in the East. That milder trend could cut cooling demand and “slash” early season heating demand, EBW Analytics Group senior analyst Eli Rubin told clients.
Rubin said the early arrival of the fall shoulder season may reduce cooling demand from about 80 cooling degree days (CDD) for the last week of August to 60 CDDs, 50 CDDs and 40 CDDs in the following three weeks, respectively.
For the eight- to 14-day period, the National Weather Service said temperatures were likely to be below normal across the Carolinas, New York-New Jersey metropolitan areas and Virginia. Meanwhile, above-normal temperatures were forecast for much of the West.
On the supply side, Lower 48 gas output averaged 102.1 Bcf/d in the seven days to Wednesday (Aug. 28), Wood Mackenzie estimated. Producers reduced output in early August amid oversupply and lower futures settlement prices, particularly in the Marcellus Shale. More supply cuts were likely to deepen in the Marcellus and in Western Canada in September and October, according to Rubin.
Supported by possible supply cuts and a rebound in outbound flows from Appalachia on the Mountain Valley Pipeline LLC, Texas Eastern M-3, Delivery added 5.2 cents week/week at $1.398 for September, Forward Look showed. Similarly, Tennessee Zn 4 Marcellus rose 9.9 cents to $1.308.
Elsewhere in the East, Cove Point led all decliners in September, down 32.3 cents at $1.516 week/week. Transco Zone 5 fell by 31.6 cents to $1.831.
Texas Laggards
West Texas forward prices slid further during the period, in line with slumps in cash markets and September Bidweek trading.
Permian Basin cash prices have averaged negative for more than a month in one of the longest stretches. The basin’s benchmark Waha has traded below zero since July 26, NGI data show.
The Waha September contract was down 19.3 cents to negative 85.3 cents, and for January 2024 shed 12.3 cents to $2.763, Forward Look showed.
The delayed startup of the 2.5 Bcf/d Matterhorn Express Pipeline is one factor behind the Permian supply glut. The pipeline is expected to start up in September or October and ramp up into early 2025, loosening the egress restraints.
Month to date, El Paso Permian September basis pricing had shed a nation-leading $1.083 to trade at minus $3.159. It was closely followed by Transwestern basis pricing down $1.080 and Waha down $1.017 since Aug. 1.
Meanwhile, echoing their strength in the latest weekly period, Appalachia hubs have led basis gains this month. Tennessee Zn 4 Marcellus basis prices for September have added 29.2 cents since Aug. 1.
Strength elsewhere for basis prices was limited in the Lower 48 to a few hubs in the Northeast.
September basis pricing for Appalachia’s Eastern Gas South added 13.5 cents to end at minus 65.4 cents. In the Northeast, Iroquois, Waddington added 16.3 cents to minus 43.7 cents for September delivery.
Western Canada Discounts
Looking at regional price trends, Canadian fixed prices and basis differentials strengthened the most during the Aug. 22-28 trading period.
NOVA/AECO C September basis added 26.8 cents week/week to end at minus $1.306. Westcoast Station 2 similarly narrowed its discount, up 26.7 cents to minus $1.503, Forward Look data show.
Stout supply has kept Canadian gas prices lower relative to U.S. hubs this year. The startup of the country’s first liquefied natural gas terminal, Shell plc-led LNG Canada, may start to draw down the supply overhang with a capacity of 2 Bcf/d of feed gas, around 10% of the country’s output.
LNG Canada was expected to begin taking feed gas this fall. It is said to be on track to ship first cargoes by mid-2025.
