The $3 weekly benchmark came a little closer in weekly gas trading for the week ended May 5. Broad gains across all market zones and producing regions pushed the NGI Weekly Spot Gas Average up 8 cents to $2.92.
Only a handful of market points lost ground and the greatest gain was seen at Dominion North with an advance of 29 cents to average $2.75. The week's biggest loser belonged to our neighbor to the north, Westcoast Station No. 2 with a decline of $C 0.13 to $C2.35/Gj.
All regions followed by NGI posted gains with Appalachia showing the greatest move of 24 cents to $2.77. The Northeast demonstrated the smallest gain, 3 cents to average $3.03.
The Midwest rose 5 cents to average $2.97 and South Texas and the Rocky Mountains gained 6 cents to $3.03 and $2.67, respectively.
Four regions rose by 7 cents; East Texas, the Midcontinent, the Southeast, and California to $3.03, $2.82, $3.04, and $2.97, respectively.
South Louisiana added 8 cents to average $3.03.
June futures fell a penny over the course of the week to $3.266.
Thursday activity saw the Energy Information Administration report a storage build of 67 Bcf for the week ending April 28, about 6 Bcf greater than what the market was expecting. Futures slumped. At 10:45 a.m. Thursday June was trading at $3.202, down 2.6 cents from Wednesday's settlement. At the close, June had dropped 4.2 cents to $3.186 and July was lower by 3.8 cents to $3.271. June crude oil plunged $2.30 on Thursday to $45.52/bbl, the lowest settlement of a spot contract in over five months.
Before EIA's storage number was released, Citi Futures Perspective predicted a build of 54 Bcf, and PIRA Energy was expecting a 66 Bcf increase. A Reuters survey of 21 traders and analysts revealed an average 61 Bcf injection with a range of 50-70 Bcf.
Last year 68 Bcf was injected and the five-year average was for a 63 Bcf build.
"We are still kind of stuck in a range, but we didn't touch the lows from yesterday," said a New York floor trader. "The market is moving sideways."
"The DOE reported a larger-than-expected 67 Bcf net injection into U.S. natural gas storage for the week ended April 28, more than the 62 Bcf five-year average refill," said Tim Evans of Citi Futures Perspective. "This was the third consecutive report that was weaker than what our weather-based model projected, implying a weakening trend in the background supply/demand balance. Even so, we still anticipate below-average storage injections over the next two reports, which may limit the downside for prices."
"We believe the storage report will be viewed as slightly negative," said Randy Ollenberger of BMO Capital Markets. "Storage is trending below last year's levels; however, rising associated gas production should keep U.S. storage levels at, or above, five-year averages, assuming normal weather."
Inventories now stand at 2,256 Bcf and are 359 Bcf less than last year and 303 Bcf greater than the five-year average. In the East Region 22 Bcf was injected, and the Midwest Region saw inventories rise by 15 Bcf. Stocks in the Mountain Region were greater by 4 Bcf, and the Pacific Region was up 5 Bcf. The South Central Region increased 21 Bcf.
In Friday trading natural gas for weekend and Monday delivery fell as traders felt comfortable with supply and didn't see the need to commit to three-day deals. Weakness in the Northeast, Rockies, and California was able to dominate somewhat firmer pricing in South Texas and Appalachia and theNGI National Spot Gas Average retreated 3 cents to $2.88.
Futures traders were somewhat surprised by the market's gain. At the close Friday June had added 8.0 cents to $3.266 and July had gained 7.9 cents to $3.350. June crude oil partially recovered from its Thursday price collapse and added 70 cents to $46.22/bbl.
Midwest markets were thrown something of a curve ball when Vector Pipeline announced a force majeure Friday morning. "Due to an incident in Lake County, Indiana, the Vector pipeline will be out of service effective immediately and until further notice," the company reported. "Scheduled quantities will be reduced to EPSQ at all receipt and delivery points effective for the Intraday 1 cycle of today's gas day, May 5, 2017. Updates for tomorrow's gas day will be posted as information becomes available.
"The incident is unrelated to the planned service outage. Further information will be posted as it becomes available," the company said.
Gas at the Chicago Citygate was flat at $2.96 and deliveries to Alliance shed 3 cents to $2.90. Gas on Michcon rose a penny to $3.04.
Other market centers were mostly lower. Gas at the Algonquin Citygate fell 8 cents to $3.01, and deliveries to the Henry Hub were flat at $3.07. Gas on Dominion South was unchanged at $2.75.
Parcels on Northern Natural Demarcation skidded 4 cents to $2.84 and gas on El Paso Permian fell 9 cents to $2.65. Gas at Opal was quoted 6 cents lower at $2.70 and gas priced at the SoCal Citygate retreated 7 cents to $3.12.
Futures traders weren't expecting the day's advance. "The advance has somewhat neutralized the selloff," said Tom Saal, vice president at FCStone Latin America in Miami.
"The market's next direction is 50-50, but I still have 2 value areas below and none above, so if I am leaning any way, I am leaning lower. The two value areas are $3.134 to $3.152 and $3.051 to $3.075."
"I'm not sure what caused the rally today. There was some big volume that came in around noon." He thought there might have been a weather update, but "weather this time of year is inconsequential, but people will trade off of it."
The market opened 2 cents higher at $3.21 as traders studied more extended cool temperature forecasts and tried to navigate a directionless market.
Traders are finding the natural gas market a tough way to make a buck. "This market remains frustrating to both the bulls and the bears as it has been unable to sustain a price move in either direction in almost a month," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients. "[Thursday's] seemingly bearish EIA storage report provided a case in point as an injection that was about 6 Bcf larger than anticipated exerted only moderate selling pressure that is being largely negated this morning. Some of today's support appears forthcoming from some adjustments to the one- to two-week temperature forecasts favoring much broader coverage of below-normal temps than generally predicted yesterday.
"The likelihood that next Thursday's EIA report will show a reduction in the surplus of as much as 20-25 Bcf is also spurring some buying interest. Regardless, making another run at this week's highs of $3.31 could prove arduous unless weekend updates suggest some major revisions toward the cold side. Otherwise, we will await a close to below $3.16 to force further decline to our targeted $3.05 area, a level that approximates current spot pricing at [Henry Hub]."
Gas buyers for weekend power generation across the ERCOT power pool will have little wind generation to work with at first, but as the weekend wears on renewables should ramp up sharply.
"Fair weather and a warming trend are expected during the weekend into early next week," said WSI Corp. in its morning forecast to clients. "Max temps will rebound into the 80s to near 90. Humidity levels will remain comfortable but start to creep up during Monday-Tuesday.
"Weak wind generation is expected [Friday]. Output is forecast to bottom out around 1 GW or less. A diurnally influenced return southerly wind will cause output to ramp up tonight into early next week and output is forecast to climb up 10-13+ GW. Plentiful sunshine will support ample solar through the majority of the forecast period."
Natural gas usage could soon see support from increased economic activity, if the most recent Labor Department data is any indication. In its 8:30 a.m. EDT release, the Labor Department reported non-farm payrolls rose by 211,000, which was more than the 190,000 forecast by economists. The unemployment rate fell to 4.4%. The Dow Jones Industrial Average rose 55 points to 21,007.