October Nymex natural gas futures settled higher Thursday on some bullish implications from the latest storage data and potential lingering strong demand on the possibility that hot weather may continue through September.
At A Glance:
- Futures pull out gain
- Storage up 35 Bcf
- Possible hot September
The freshly anointed prompt month contract settled up 4.0 cents on the day at $2.137/MMBtu. The October futures contract traded on either side of unchanged in an initial muted response to the print but widened its range through the session to $2.026 to $2.149.
NGI’s Spot Gas National Avg. fell 17.0 cents to $1.135 with demand set to tumble because of milder weather and the three-day Labor Day holiday.
“I thought the injection was quite bullish on a temperature-adjusted basis and therefore implied a bullish supply and demand,” Snapper Creek Energy analyst Kyle Cooper told NGI. Although the storage figure was above last year, it was smaller than both the three-year and five-year averages, he noted. “So, again, I think it has some bullish implications, and we have fallen a long way, so gains were also a little bit of short covering.”
The U.S. Energy Information Administration (EIA) data showed a 35 Bcf build to storage facilities across the Lower 48. The injection compared with a build of 28 Bcf during the same week a year ago and a five-year average increase of 43 Bcf. The total working gas supply climbed to 3,334 Bcf, dropping the surplus to 361 Bcf, or 12.1% above the five-year average.
The build was within the wide range of estimates ahead of the print. A Reuters survey found injections spanning 28 Bcf to 55 Bcf, with a median increase of 38 Bcf. A Bloomberg survey outlined builds of 31 Bcf to 43 Bcf, with consensus at 35 Bcf. NGI modeled a build of 34 Bcf.
“Storage…was not of much consequence either way,” Pinebrook Energy Advisors’ Andy Huenefeld, managing partner, told NGI. He noted that the report came in a little lighter than consensus market expectations and was in line with the prior week. “That indicated the supply/demand balance didn’t change much week/week…
“We still see this as a very range bound market. It is going to take more than one storage report to change that,” Huenefeld said. The next storage print covering the week ending Aug. 30 should be smaller as “the last gasps of summer” increased the demand for power generation from the prior week.
Preliminary estimates from Reuters for the week ending Aug. 30 ranged from injections of 22 Bcf to 49 Bcf, with an average increase of 34 Bcf. That would compare with an increase of 33 Bcf during the same week last year and a five-year average increase of 51 Bcf.
Output at the Freeport LNG facility in Texas, which was shut Wednesday, “could take a little off from the increase in power burn,” Huenefeld said. The liquefied natural gas facility was operating at one-half of its 2.61 Bcf operational capacity Thursday, he said.
Freeport shuttered unexpectedly early Wednesday because a fire safety suppression system was activated during routine maintenance. There was no fire or threat to the surrounding community, but safety protocols forced the shutdown. The LNG facility on Thursday was “still ramping up,” spokesperson Heather Browne told NGI.
Feed gas deliveries to Freeport were pegged at 1.01 Bcf Thursday, NGI’s U.S. LNG Export Flow Tracker showed. Flows to all domestic LNG facilities were 12.12 Bcf Thursday versus 11.26 Bcf a day earlier.
After next week, “we should see things start to ramp up,” Huenefeld said. He noted a “nice cooldown” could help storage builds pick back up. Pinebrook analysts expect end-of-season storage slightly below 3.9 Bcf.
The Weather Front
National demand was forecast to remain strong through the holiday weekend, with “very warm to hot” highs expected from the mid-80s to 100s across most of the country, NatGasWeather said. The firm noted Texas could cool a few more degrees to the mid-80s to low 90s. Electric Reliability Council of Texas demand could potentially “soften considerably versus the prior week.”
National demand was expected to ease to only moderate levels next week because highs into the 90s were likely to decrease in the South. Highs in the upper 60s to lower 80s were forecast across the Midwest and East, NatGasWeather said.
With temperatures expected to moderate, Thursday’s production data showed a decline of nearly 1.87 Bcf/d after a 1.23 Bcf/d upward revision Wednesday, said Wood Mackenzie analyst Emma Weng. Losses were concentrated in the New Mexico portion of the Permian Basin, as well as Pennsylvania and West Virginia.
However, the National Oceanic and Atmospheric Administration (NOAA) forecast for September showed above-average temperatures in Colorado, Utah and parts of surrounding states. A swath of the United States from New England down the Eastern Seaboard and across much of the South was also expected to see above-normal temperatures. NOAA’s outlook called for normal readings for small areas along the California Coast and the North, while “not one area of the country was forecast to see below average reading.”
Producers, including the nation’s No. 1 gas producer, EQT Corp., said curtailments underway would continue through the fall. That could change to meet lingering cooling loads. “The latest EIA monthly production data showed that August was at the highest level since February at 103.6 Bcf/d,” R.J. O’Brien & Associates senior analyst Tom Pawlicki told NGI.
Cash Trade
Spot gas prices were mixed, with a lower bias as participants traded for Friday-Saturday delivery to accommodate the market’s closure for Labor Day.
AccuWeather forecasts showed Texas temperatures would hold in the upper 80s through the weekend. Cooler temperatures from the 90s to the 100s combined with the typically low-demand Saturday to deflate prices.
Waha sank $2.740 to average negative $6.410, while El Paso Permian, at negative $5.975, was off $2.435 day/day. Similar conditions in the Southeast pressed Florida Gas Zone 3 16.5 cents lower to $2.080. Transco Zone 5 slid 11.5 cents to $2.045, while Transco Zone 4 fell 11.0 cents to $2.050.
Conversely, scattered hubs in the Midcontinent and Midwest were higher. The OGT average of $1.415 was 4.5 cents higher day/day. Emerson gained 15.0 cents to 82.0 cents.
