Natural gas spot prices were mixed but biased lower in a week defined by changing weather patterns portending lower demand and a lofty supply of gas in storage that remained a weight despite modest tightening.
NGI’s Weekly Spot Gas National Avg. for the Aug. 26-29 period for August delivery fell 11.5 cents to $1.380/MMBtu.
The blazing sun continued to shine on Texas, keeping temperatures in the 90s and 100s for much of the week. Yet, with an abundance of natural gas due to strong Permian Basin production, prices remained under pressure. Later in the week, forecasts that called for temperatures to slide a few degrees added downside pressure.
Transwestern led losses, sinking $2.285 to the region’s and country’s lowest average of negative $3.730. Waha dropped $2.140 to negative $3.270. Midcontinent and Midwest prices also slipped, though losses were comparatively modest. OGT averaged $1.470, down 9.5 cents week/week. NGPL Iowa-Illinois, at $1.610, was down 9.0 cents.
Sunbaked California also experienced a modest cooldown, which was reflected in lower spot gas prices. PG&E Citygate fell 14.0 cents week/week to $2.255, and SoCal Citygate slipped 13.5 cents to $1.520.
On the opposite side of the country, prices in the Northeast were higher. Transco Zone 6 NY was 18.0 cents higher to $1.575 and Transco Zone 6 non-NY gained 15.5 cents to $1.530.
In futures trading, it was a happy week for market bears with the Nymex September contract tripping lower as the contract headed toward expiration at the close of business Wednesday. While market bulls took the reins Thursday, their hold was brief as the freshly anointed prompt month October contract settled Friday at $2.127, down 1.0 cents on the day and up 10.5 cents from the prior week’s finish.
The latest storage print on Thursday contributed to the futures contract’s early modest strength. The U.S. Energy Information Administration data showed a 35 Bcf build to storage facilities across the Lower 48. The injection brought the total working gas supply to 3,334 Bcf, narrowing the surplus to 361 Bcf, or 12.1% above the five-year average.
“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.”
Overall, however, the report came in slightly lighter than consensus market expectations and was in line with the prior week, Pinebrook Energy Advisors’ Andy Huenefeld, managing partner, told NGI. “That indicated the supply/demand balance didn’t change much week/week.” The market remained range bound, he said.
Strength was also limited by production, which held steady at a weekly average of 102.2 Bcf/d, Wood Mackenzie estimated. Further, Lower 48 demand slid through the week. The firm estimated Friday demand, excluding exports, at 82.9 Bcf versus 93.5 Bcf Tuesday. At 47.4 Bcf Friday, power demand was down from Tuesday’s high of 55.2 Bcf.
Weather Anchors
“Cooler temperatures spreading across the U.S. have hampered recent power demand,” Gelber & Associates analysts said. The analysts noted that, during late August last year, power demand was nearly 5 Bcf/d higher compared with the August just ended.
“European weather models shifted cooler and now it is becoming more likely that shoulder season, when natural gas demand is at its lowest, makes an early appearance,” the Gelber analysts said. Hurricane activity has remained subdued recently, but “the Atlantic is showing signs of life yet again and mid-September has the potential to bring additional systems to the Gulf Coast,” the firm said.
NatGasWeather agreed. “The tropics are quiet and with no storms expected near the United States the next seven days.” The firm noted, however, that there was a tropical wave tracking towards the Caribbean with some potential for development.
Meanwhile, the temperature outlook for the six- to 10-day period cooled for the Southeast, Midwest and East. Highs in the upper 60s to lower 80s were forecast. National demand was expected to weaken even as Texas remained hot, with highs in the upper 90s, which were still a few degrees cooler than prior weeks.
“September may be the mildest September in 15 years and could fall 40 cooling degree days (CDD) shy of the ten-year average — lifting our end-of-October storage trajectory towards 3,900 Bcf,” EBW Analytics Group senior analyst Eli Rubin said. He said that after the first week of September, national demand may struggle to attain 50 CDDs/week.
LNG demand also took a hit during the week. Feed gas flows to domestic liquefied natural gas facilities were trimmed as the Freeport LNG facility in Texas shuttered unexpectedly on Wednesday because a fire safety suppression system was activated during routine maintenance. By Friday, feed gas nominations ramped up to 1.79 Bcf, or about 69% of the pipeline capacity feeding the facility, according to NGI data.
Deliveries to LNG facilities at 12.9 Bcf Friday were up from a Wednesday low of 11.26 Bcf, NGI’s U.S. LNG Export Flow Tracker showed.
Friday’s Cash
Spot gas prices climbed as weather outlooks suggested some areas of lingering heat through the extended Labor Day weekend.
The National Weather Service forecasted “hot, much above average temperatures” over the northern tier of the West. The heat was expected to intensify and expand into the northern Rockies through the weekend. Across the region, near or slightly above average temperatures in the 60s and 70s were forecast for coastal areas, 80s to low 90s for the Great Basin, mid-90s for the central California Valleys, and 100s in the Desert Southwest.
SoCal Citygate prices were 24.0 cents higher day/day to a $1.700 average. Malin gained 18.5 cents to $1.510. CIG in the Rockies added 18.5 cents to $1.395, while Opal at $1.480 was 14.5 cents higher on the day.
