Natural gas spot prices were lower in a week marked by declining demand expectations on the cusp of the fall shoulder season and a slower drawdown of storage surpluses that fed fresh concerns about the stubbornly high Lower 48 supply.
NGI’s Weekly Spot Gas National Avg. for the Aug. 19-23 trading period fell 15.0 cents to $1.495/MMBtu.
Losses were spread widely across most regions. PG&E Citygate was among the largest losers sinking 34.5 cents week/week to average $2.395. PNGTS Non-Border followed, tumbling 33.0 cents to $1.845. OGT slipped 20.0 cents on the week to $1.565.
A promising start in the futures market quickly eroded into a week that saw about one-third of the gains made since early August erased, according to Gelber & Associates analysts. September futures settled Monday up 11.2 cents at $2.235. The prompt month contract on Friday settled at $2.022, down 3.1 cents on the day and down 10.1 cents from the prior week’s close.
Production levels held steady at an average 101.1 Bcf/d week/week, according to Wood Mackenzie data. The 30-day average output was 101.8 Bcf/d, well below the 103 Bcf/d averages earlier this year, before producers, including EQT Corp, Chesapeake Energy Corp. and Comstock Resources Inc., cut production. The companies said they would continue to curtail output through the fall.
Greater efforts to pull back supply may be needed, however, as the market remained fixated on the lingering storage surplus. Storage worries escalated after Thursday’s weekly government report showed a 35 Bcf build to inventories for the week ending Aug. 16.
The build was at the high end of estimates. A Reuters poll pegged the storage forecast at 20 Bcf to 42 Bcf, with a median increase of 27 Bcf. A Bloomberg survey outlined injections of 21 Bcf to 42 Bcf, with consensus at 25 Bcf. NGI modeled a build of 27 Bcf. It compared with a build of 23 Bcf during the same week a year ago and a five-year average increase of 41 Bcf.
The larger injection followed a rare summer withdrawal of 6 Bcf in the previous week’s data.
The U.S. Energy Information Administration (EIA) said the average rate of injections into storage had been 21% lower than the five-year average so far in the refill season (April through October). “If the rate of injections into storage matched the five-year average of 9.9 Bcf/d for the remainder of the refill season, the total inventory would be 4,087 Bcf on October 31, which is 375 Bcf higher than the five-year average of 3,712 Bcf for that time of year,” NatGasWeather meteorologist Rhett Milne said.
Yet, to “not blow the doors off storage and further annihilate prices,” East Daley Analytics analyst Jack Weixel said “the magic number” that net injections must be below the five-year average each week is 18.5 Bcf for the rest of the injection season. East Daley’s end-of-season supply estimate sat at 3,884 Bcf, ahead of the EIA’s latest storage print.
Weather would have to play its part to support demand going forward, according to analysts. This week, the regional grid operator, the Electric Reliability Council of Texas, set a new record high load Tuesday at 85,544 MW as the state remained under excessive heat. Elsewhere, temperature changes hinted at a cooldown that could deflate national demand as the fall season approaches.
Summer’s Last Stand?
Cooling degree days were “decently cooler” week/week, Milne said. He noted that wind and solar energy generation were also modestly stronger. While national demand was lighter this week, he said demand would likely be “quite strong next week.”
The latest weather forecasts showed an impressively hot weather pattern setting up Friday through next week. High temperatures in the 90s to 100s were expected over much of the country. Readings in the 70s and 80s across the far northern reaches were the exception. Demand outlooks remained strong in Texas despite a modest cooldown. NatGasWeather said that temperatures were still seen rising into the mid-90s.
The Northeast could see “perfect highs” of the upper 60s to lower 80s in the eight-to-15-day period as a slightly cooler trend showed up in forecasts. Hot weather conditions were expected over the country’s southern half to keep national demand “decently strong but not impressive,” the firm said.
The weather pattern would be hotter than normal for the third week of September. Milne noted, however, that national demand would fade “as the nights become notably longer and days shorter.”
Pinebrook Energy Advisors managing partner Blake Owen agreed. “We are in that period of time when the peak load, the daily peaks, are declining and will continue to decline as we move into September and then into October where they typically see their seasonal lows sometime in October and early November.”
Spot Prices Stumble
Spot gas prices were mixed Friday because of regional weather patterns and the weekend days included in the Saturday-Monday package.
Henry Hub cash prices averaged $1.825, off 9.5 cents day/day. Waha crumbled 89.5 cents to negative $2.170. Opal fell 37.0 cents to $1.075, while Southern Border, PG&E slid 37.0 cents to $1.005.
Conversely, Transco Zone 6 non-NY gained 21.5 cents on the day to $1.435, and Texas Eastern M-3 delivery added 20.0 cents to $1.470.
