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Mix of Bearish, Bullish Signals Keeps Natural Gas Futures Range-Bound; Midcon Cash Rises

Natural gas futures again struggled to find much momentum in either direction Monday as long-range warming softened the impact of short- and medium-range colder trends, and prices traded in a tight range.

Forecasts for snowy conditions this week helped lift spot prices in the Midcontinent and the Northeast, while moderating temperatures saw prices in Southern California retreat, and the NGI National Spot Gas Average added 4 cents to $2.50/MMBtu.

The April contract settled at $2.704 Monday, up 0.9 cents versus Friday’s settle. May settled 1.1 cents higher at $2.738.

“The latest midday data trended further colder over the eastern U.S. March 11-15, but was milder trending March 16-20 as a warm ridge is favored to expand over much of the eastern half of the country,” NatGasWeather.com said Monday. “...With prices selling off a few cents as the Global Forecast System model was showing these trends, it suggests the markets might be weighing the milder after-March 16 period more so than colder trends before it.”

The firm noted the recent lack of volatility in the futures market.

“With April trading in a tight range all last week, even with milder trends early in the week, and colder trends at the end of the week, it seems other factors are keeping volatility suppressed,” NatGasWeather said. “But again, we aren’t convinced the markets see” the current pattern as cold enough considering the warming expected later this month and calls for this week’s storage report “to print more than 60 Bcf lighter than the five-year average.”

The Desk’s Early View natural gas storage survey, released last week, showed respondents on average expecting a 56.9 Bcf withdrawal from this week’s Energy Information Administration (EIA) report. That would be in line with the 57 Bcf withdrawal in the year-ago period but looser versus a five-year average withdrawal of 129 Bcf.

Stephen Smith Energy Associates on Monday said it’s projecting a 57 Bcf withdrawal for the week ending March 2. That’s versus a seasonally normal draw of 59 Bcf based on 2006-2010 norms, according to the firm.

Intercontinental Exchange futures settled Friday at -58 Bcf for the upcoming EIA report.

On Sunday and Monday “trading was all within a tight 5.3-cent range as again we continue to see short- and medium-term cold combine with strong power burns to keep a strong floor in for prices,” Bespoke Weather Services said. “Meanwhile, American guidance trended a bit warmer, pulling prices back briefly midday before European guidance added a chunk of heating demand back in the medium-term, pinning prices right by the $2.70 level.”

The models could add some heating demand to the outlook over the course of the week, but “upside still appears limited from warmer trends” beginning in the 11-15 day timeframe, the firm said. “Production remains near record highs as well, similarly capping upside. The result, then, is what should be a relatively tight trading range between $2.65 and $2.75 through the next few days.”

In the spot market, points in the Midcontinent gained by double digits Monday as the National Weather Service (NWS) was calling for blizzard conditions in the Northern Plains and Upper Midwest starting Tuesday.

“Heavy snow is forecast to continue for the Northern Plains and into the Upper Midwest and Upper Great Lakes,” NWS said. “The heavy snow will combine with strong winds to create the possibility of blizzard conditions, particularly for portions of the Northern Plains, where blizzard warnings are in effect through Tuesday.”

Genscape Inc. was calling for Midcontinent demand to climb from 2.74 Bcf/d Monday to 3.57 Bcf/d Tuesday and 3.91 Bcf/d Wednesday.

Northern Natural Demarcation jumped 15 cents to $2.48 Monday, while Northern Border Ventura gained 13 cents to $2.47.

Meanwhile, points in the Northeast and Appalachia strengthened Monday amid calls for another nor’easter to sweep through this week.

“A surface low will move through the Carolinas Tuesday evening and begin strengthening Wednesday morning as it moves offshore,” NWS said. “This low will strengthen quickly as it moves northeastward...just offshore of the Eastern Seaboard on Wednesday.

“Snow is expected from Pennsylvania northward through the Northeast, with totals of 6-10 inches possible for eastern Pennsylvania, eastern New York and western Massachusetts through Wednesday evening, west of the major cities. Lighter snowfall is forecast for the Central Appalachians and back into the northern Ohio Valley and Great Lakes region.”

Transco Zone 6 New York added 11 cents to $2.77, while Dominion South tacked on 11 cents to average $2.26.

The nor’easter that hit late last week “was more demand-destructive than stimulative, but a trailing cold front may may lift regional demand in the week ahead,” according to Genscape.

“Appalachia region-wide demand averaged 12.98 Bcf/d this weekend despite a notable cooldown in temperatures from last week. On a weather- and weekend-adjusted basis, demand should have come in closer to 13.5 Bcf/d.”

For the week ahead, demand could increase, the firm said.

“As the region digs out of the snows, temperatures around New York City are forecast to run 2-3 degrees below normal Monday and Tuesday, and about 10 degrees below normal on Wednesday before returning to normal Thursday,” Genscape said. “Those temperatures, translated into our regional demand forecasts, suggest Appalachia demand will rise to a high this week near 15.6 Bcf/d by March 9.”

Meanwhile, Southern California prices moderated Monday as utilities Southern California Gas Co. (SoCalGas) and San Diego Gas & Electric (SDG&E) announced that starting Tuesday they planned to lift a system-wide curtailment on electric generation customers that had been in place since Feb. 20.

“Forecasted temperatures across the SoCalGas and SDG&E service territory are projected to increase, resulting in reductions in forecasted customer demand,” the utilities said.

SoCalGas was forecasting system-wide demand to fall below 3 Bcf/d later this week, significantly lower than levels reported the previous two weeks, when SoCal Citygate experienced price spikes as high as $25 or more.

SoCal Citygate tumbled 65 cents to $2.74, and SoCal Border Average similarly dropped 62 cents to $2.27. El Paso S. Mainline/N. Baja gave up 70 cents to $2.25.

A force majeure event declared last week limiting flows on El Paso Natural Gas (EPNG) pipeline’s Tom Mix compressor station ended earlier than expected on Sunday, according to Genscape.

“The downstream decrease in EPNG’s deliveries to SoCalGas was only about 100 MMcf/d day/day despite the 476 MMcf/d Tom Mix flow cut, which was accomplished via distributed re-routing on EPNG’s system,” Genscape said.

Meanwhile, a separate one-day maintenance event was expected to affect around 150 MMcf/d of flows Tuesday on EPNG’s South Mainline in Arizona via its Willcox meter, Genscape told clients Monday.

“The Willcox meter tracks flows on the low pressure system of the South Mainline and typically corresponds to demand in New Mexico and Arizona, particularly the Phoenix metro area,” the firm said. “Some rerouting of molecules onto the nearby Cimarron or Bowie meters might occur.”

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