Weekly natural gas cash prices gained ground amid falling production estimates and searing summer temperatures across stretches of the South.
NGI’s Weekly Spot Gas National Avg. for the Sept. 3-6 period rose 31.5 cents to $1.695/MMBtu.
Conditions during the first trading week of September were defined by mild temperatures in the North but the opposite elsewhere.
National Weather Service (NWS) data showed highs in the 90s along with elevated humidity in parts of the Southeast, and peak temperatures in the 100s across the Southwest and portions of Southern California. NWS forecasts pointed to a similarly mixed outlook through the first half of September.
At the same time, Wood Mackenzie estimates showed production just below 101 Bcf/d during the week – off more than 2 Bcf/d from summer highs.
As the trading week closed, SoCal Citygate was up 56.0 cents to $2.080, while KRGT Del Pool in the Southwest was ahead 53.0 cents to $1.960, and Oneok WesTex was up 46.5 cents to $1.275.
Meanwhile, the October Nymex contract seesawed but ultimately advanced for the week as traders weighed near-term bullish undercurrents against the almost inevitable onset of benign fall weather in coming weeks. October futures settled at $2.275 to close trading on Friday, up 2.1 cents on the day and ahead 7% from the prior week’s finish.
“Yes, we still have summer in the South and those production estimates are bullish,” StoneX Financial Inc.’s Thomas Saal, senior vice president of energy, told NGI. “But we may need to see a little more mojo on the weather front and more of a sustained pullback” in production “to further support prices from here.”
He noted that LNG demand strengthened in late August and early this month. Export facilities’ calls for feed gas hovered above 13 Bcf/d over the past week, near summer highs, according to NGI data. If that were to continue, it would add another positive for futures because it would suggest increased demand from Europe and Asia ahead of the coming winter. Both continents depend on U.S. liquefied natural gas to ensure ample supplies for long or especially cold winters.
“Winter is the big event for natural gas – here and globally,” Saal said.
EBW Analytics Group’s Eli Rubin, senior analyst, agreed that global demand heading toward winter is key. Between now and then, however, traders are closely watching U.S. production readings for further signs of curtailments that could help align supply/demand in the fall and eat into a hefty storage surplus relative to the five-year average.
“The most critical near-term story may be that daily natural gas production is continuing to decline,” Rubin said. “However, weak weather-driven demand for gas” in the fall “may impede progress in narrowing storage surpluses -- suggesting range-bound trading may be the most-likely near-term outcome.”
Storage Situation
Futures got their biggest bump of the week on Thursday following a bullish storage print from the U.S. Energy Information Administration (EIA). The agency reported an injection of 13 Bcf natural gas into storage for the week ended Aug. 30 that did indeed lower the surplus to the five-year average by more than a percentage point to 11%.
The result missed expectations by a wide margin – to the bullish side – and also fell shy of historical norms. Prior to the report, estimates in major polls coalesced around 27 Bcf. NGI modeled a build of 20 Bcf. The prior five-year average increase was 51 Bcf.
A 14 Bcf withdrawal in the South Central region and lighter production levels in late August kept the overall injection figure paltry.
“The lower production levels of late would certainly be a contributing factor,” Paragon Global Markets LLC’s Steve Blair, managing director of institutional energy sales, told NGI.
Steady LNG demand contributed as well.
“The U.S. exported a total 8 million tons of LNG in August this year, a monthly high and some 6% up on August 2023 levels and 13% higher than in July 2024,” said Rystad Energy analyst Masanori Odaka.
Still, the increase for the Aug. 30 week boosted inventories to 3,347 Bcf, keeping stocks above the five-year average of 3,024 Bcf.
The surplus “remains large, despite a rapid decline in the past few months,” Gelber & Associates analysts said.
Looking ahead to the next EIA report, covering the first week of September, analysts preliminarily anticipated another seasonally small increase. Early injection estimates submitted to Reuters averaged 49 Bcf. That compares with a five-year average build of 67 Bcf.
Friday Cash Prices
Spot gas prices varied by region on Friday, but advances in the South bolstered the national average. NGI’s Spot Gas National Avg. picked up 1.0 cent to $1.745.
Leading gainers included Houston Ship Channel, up 10.5 cents to $1.920, and Southern Natural, ahead 9.5 cents to $2.115.
NatGasWeather said that, during the coming trading week, swaths of the South and West could continue to bake under lofty temperatures. Elsewhere, however, conditions will be “comfortable with highs of 60s to 80s.” The pattern could be amplified by “heavy rains along most of the Gulf Coast and a cooler-than-normal weather system tracking across the Midwest and East.”
The projected southern rains were linked to a tropical system that was tracking toward the Gulf of Mexico, NatGasWeather said. The firm said “numerous” other tropical systems were worthy of watching closely in the second week of September, though none appeared “all that intimidating” as of Friday.
West Texas prices held in positive territory for a second session to close out the week for reasons beyond weather. This was notable because hubs in the area have struggled amid backed up supply in the Permian Basin. Prices were negative at Permian benchmark Waha through much of the summer. While the hub shed 5.0 cents, it averaged positive 11.0 cents on Friday.
Rubin noted that the long-awaited Matterhorn Express Pipeline started initial flows from the Permian this month, beginning the process of easing the supply glut.
Stil, Waha is far from the nearly $1.800 level of other key hubs such as Chicago Citygate and Algonquin Citygate near Boston.
While a boon to West Texas area hubs, more gas coming from the prolific basin could offset production curtailments elsewhere and potentially add bearish pressure on prices overall. “We estimate the pipeline could quickly add 1.0-1.5 Bcf/d of associated gas to national production levels within the next 30-45 days,” Rubin said.
On the maintenance front, Wood Mackenzie noted that Rockies Express Pipeline planned a two-day project beginning Sept. 24 that could cut more than 1 Bcf/d of gas flowing westbound in Ohio, potentially affecting prices at Lebanon. The hub on Friday rose 6.0 cents to $1.795.
More immediately, Kinder Morgan Inc.’s Tennessee Gas Pipeline Co. issued an operational flow order beginning Saturday (Sept. 7) and lasting until further notice that affects a broad section of the Southeast. It cited planned maintenance.
The Southeast Regional Avg. on Friday slipped 4.0 cents to $1.995.
