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Brief Spike Not Enough to Stop Bleeding in Northeast NatGas Markets

Natural gas forwards markets continued to post steep, double-digit losses for the period between Dec. 11 and 17, even as a brief weather system expected to hit the U.S. Northeast over the weekend provided a late-week surge to prices in that region.

At New England’s Algonquin Gas Transmission citygates, January fixed prices jumped 26.5 cents from Wednesday to Thursday, settling at $4.535, according to NGI’s Forward Look.

Meanwhile, February prices picked up 24 cents to hit $5.403, and the balance of winter (February-March) rose 25 cents to $4.80, Forward Look data shows.

The price spike occurred as forecasts showed a weather system sweeping through the eastern U.S. Friday, leaving behind scattered snow showers and increased demand for the next few days as overnight temperatures dip into the single digits in some areas.

The hefty gains, however, failed to erase the dramatic slide that occurred earlier in the week, leaving Algonquin’s prompt month down some 70 cents between Friday and Monday alone.

Algonquin’s January package ended the period between Dec. 11 and 17 down 60 cents, while February was down 43 cents and the balance of winter was down 29 cents, according to Forward Look.

The New England market, and others in the Northeast, continue to falter as significantly cold weather has yet to materialize this winter, keeping a tight lid on demand and even leading to unusual storage injections in the region.

A total of 0.73 Bcf has been injected at New York’s Stagecoach since Dec. 11, bringing inventories at the facility to nearly 25 Bcf. This magnitude of injections has only been seen once before -- last December 2014 when the system injected 1 Bcf/d between Dec. 24 and 30, when demand dropped nearly 3 Bcf/d from the week prior, according to Bentek Energy.

It’s a trend that could continue next week as demand is expected to return to below-average levels following the weekend’s cold snap.

Genscape shows Appalachian demand falling to 12.28 Bcf/d by Monday after hitting 15.56 Bcf/d on Saturday.

The company projects demand to average about 13 Bcf/d for the week.

Genscape, based in Louisville, KY, provides real-time data and intelligence for energy and commodity markets.

Meanwhile, Forward Look data shows Transco Zone 6-New York January plunging 60.5 cents between Dec. 11 and 17 to reach $3.75, and the balance of winter dropping 29 cents to $3.695.

Tetco M3 January came off 40 cents to $2.25, while the balance of winter fell 16.5 cents to $2.37.

Moreover, the most recent forecasts indicate it could very well be the new year before the region sees more sustained cold weather.

“There will still be additional weather systems bringing rain and snow to the West next week, and then gradually across the Plains and Texas, but still not far enough east to matter,” said forecasters with NatGasWeather.

“The natgas markets desperately need prolonged cold over the northern and eastern U.S. to arrive, and that has still yet to show up in much of the data,” it said.

NatGasWeather warned, however, that it expects “ominous cold” to remain over Canada through the rest of December that has potential to be tapped toward the start of January, which is necessary if strong bearish headwinds are going to finally end.

Most other natural gas markets across the U.S. posted losses of about 20 cents at front of the curve, following closely in line with the Nymex.

The Nymex January contract fell 23.3 cents to settle Thursday at $1.757 amid a surprise storage report that showed a meager 34 Bcf withdrawal from storage inventories for the week ending Dec. 11.

It was the smallest pull from storage for the second week of December in the 22 years for which data is available, according to U.S. Energy Information Administration and NGI calculations.

The previous smallest withdrawal for the second week of December was 43 Bcf, which was recorded in 1994 and again in 2001. The draw is even more bearish when you consider that the average of the second week of December’s withdrawals between 1994 and 2015 is 115 Bcf.

Meanwhile, some western markets put up smaller decreases at the front of the curve as the region continues to experience the bulk of any cold weather that hits the U.S.

Northwest Pipeline-Rockies January fixed prices were down just 12 cents between Dec. 11 and 17 to reach $1.91, while the balance of winter was down 5 cents to $1.98.

The comparable “strength” comes as Genscape projects demand in the Rockies to average 2.45 Bcf/d from Dec. 21 to 25, up from the recent seven day average of 1.97 Bcf/d.

Washington prices were also down about 12 cents at the front of the curve, while California prices fell less than 10 cents on average.

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