Shoulder season may be just around the corner, but a couple winter storms crashing into the populated East Coast during the week proved enough to lift weekly natural gas spot prices. The NGI Weekly Spot Gas Average gained 13 cents to $2.56/MMBtu.
A pair of nor’easters bringing heavy snow and strong winds to the Northeast and Mid-Atlantic during the week helped lift demand, though power outages and disrupted travel combined to limit the overall natural gas impact, according to analysts.
Algonquin Citygate added 98 cents on the week to average $3.69, while Dracut notched a 77-cent increase to $4.14. Transco Zone 6 New York added 22 cents to $2.91.
Prices in the Gulf Coast worked their way higher during the week as futures showed moments of bullish momentum. Henry Hub added 9 cents to average $2.71, coming into better alignment with the April contract.
In the West, prices finished flat to down as temperatures moderated and demand dropped in places like Southern California. SoCal Citygate gave up 7 cents to $2.81, while SoCal Border Average tumbled 23 cents to average $2.31. El Paso S. Mainline/N. Baja gave up 32 cents to $2.32.
West Texas points posted heavy losses late in the week. On a weekly basis, El Paso Permian finished 8 cents lower at $1.95, while Waha fell 3 cents on to $2.07.
Natural gas futures lost steam Friday after a promising start to the week, as a relatively light storage pull combined with medium-range warming trends to weigh on prices. The April contract settled at $2.732 Friday, down 2.4 cents on the day but higher week/week from the prior Friday’s $2.695 settle.
April had started the week off strong, adding around 8 cents over the first three trading days on a colder weather outlook for March. But Thursday’s Energy Information Administration (EIA) storage report came in looser versus five-year norms, and that seemed to take some of the wind out of the market’s sails. The prompt month subsequently shed a combined 4.5 cents over Thursday’s and Friday’s sessions.
NatGasWeather.com noted “milder trends in the latest midday Global Forecast System weather model” Friday, “especially for after March 20, as the data showed a little less impressive cold air over the northern U.S. This is not a huge surprise, since the data had been trending colder for nearly three straight days and was due for a run to trend back a little milder at some point.
“...To our view, bulls had ample opportunity all this week to push prices higher on continuously colder trending weather data and failed to take advantage,” the firm said. “...This seems problematic for the bulls, although time hasn’t quite run out, especially with the end of the forecast still cold-weighted in most of the data.”
Powerhouse President Elaine Levin said the early-week rally saw prices run up against significant technical resistance around $2.80. A supportive storage picture will make it difficult for the bears to break below support around $2.60-2.65, while strong production limits price upside, she told NGI Friday.
“Perhaps this is the last hurrah for winter,” Levin said. “...I don’t know that we’re going to break this thing apart” given the storage deficit, “so we may be in for another consolidation period here.”
EIA reported a 57 Bcf withdrawal for the week ending March 2, matching the year-ago withdrawal of 57 Bcf and looser versus a five-year average pull of 129 Bcf. Last week, EIA reported a 78 Bcf withdrawal.
In the minutes following the 10:30 a.m. EDT release of the final number, the April contract hovered around $2.752, within a penny of where prices stood prior to the report. By 11 a.m. EDT, after briefly moving as high as $2.764, April was trading around $2.750, down about 2.5 cents from Wednesday’s settlement.
Prior to Thursday’s report, estimates had pointed to a withdrawal that was close to the actual figure.
A Reuters survey of traders and analysts had on average predicted a 58 Bcf withdrawal for the week. Responses had ranged from -44 Bcf to -69 Bcf. A Bloomberg survey had showed a median -58 Bcf and a range of -50 Bcf to -69 Bcf. OPIS, through its newly formed analytics division (formerly PointLogic Energy), had estimated a 61 Bcf withdrawal for the week. Stephen Smith Energy Associates had called for a 57 Bcf withdrawal. Intercontinental Exchange storage futures had settled at -58 Bcf Wednesday.
“This number hit the market consensus perfectly, however, with prices not moving much off the release,” Bespoke Weather Services said following the report. “Prices were already down on the day, seemingly pricing in such a print, and we do not see this as significantly shifting our understanding of balance.
“However, such a print does confirm that in periods of lower weather-driven demand the market is loosening, especially at these higher price levels,” the firm said. “Though we are skeptical that the number itself is enough to push prices much lower, especially given weather expectations, we see this loosening as firming up resistance from $2.80-2.82.”
Total working gas in underground storage stood at 1,625 Bcf as of March 2, according to EIA. That’s versus 2,305 Bcf a year ago and five-year average inventories of 1,925 Bcf. The current year/year storage deficit held week/week at -680 Bcf, while the year-on-five-year deficit shrank from -372 Bcf to -300 Bcf, EIA data show.
By region, the largest withdrawal came in the East at -23 Bcf, followed by 18 Bcf withdrawn in the Midwest. The Pacific saw a 12 Bcf pull for the period, while 5 Bcf was withdrawn in the Mountain region. The South Central region finished nearly unchanged for the week, with 6 Bcf injected into salt offsetting 6 Bcf pulled from nonsalt, according to EIA.
“When compared to degree days and normal seasonality, a 57 Bcf withdrawal appears tight by -0.7 Bcf/d versus the prior five-year average,” Genscape Inc. told clients Friday. “One of the big themes that we have talked about since last winter is the significant growth in residential/commercial (res/com) demand per heating degree day (HDD) that we have seen over the past few years.
“This phenomenon was the main driver behind extremely tight stats over the coldest weeks this winter; however, this winter is approaching its expiration date and balances have been trending looser as weekly HDD totals have dwindled along with the added res/com demand,” according to the firm.
The -57 Bcf figure was in line with market expectations “but also implies the market has moved closer to balance on a weather-adjusted basis” at less than 1 Bcf/d undersupplied, analysts with Tudor, Pickering, Holt & Co. (TPH) said in a note Friday. Early estimates for next week’s report “show this trend to reverse as storage estimates (92 Bcf draw) are in line with norms (95 Bcf draw), even though warmer than normal weather is expected” at 145 HDD versus 190 HDD norms “as the East Coast’s extreme weather likely obfuscates correlations.”
The TPH analysts “expect prolonged weakness in U.S. natural gas production (down 500 MMcf/d week/week)” and continued volatility in liquefied natural gas (LNG) exports volumes, down around 0.45 Bcf/d week/week. The LNG volatility “should come as no surprise” as Dominion’s Cove Point LNG terminal continues to ramp operations.
The Desk’s Early View storage survey Friday showed respondents on average expecting a 93.5 Bcf withdrawal for the week ending March 9, with estimates ranging from -63 Bcf to -109 Bcf. Last year 55 Bcf was withdrawn during the period, while the five-year average is a 97 Bcf withdrawal. Intercontinental Exchange EIA storage futures settled Thursday at -100 Bcf for the upcoming report.
In the spot market Friday, expectations for national demand to soften over the weekend corresponded with softer prices for three-day deals throughout much of the country. The largest declines came in the West, where Southern California points sold off sharply for the second straight day as forecasters called for mild temperatures in the region.
Southern California Gas Co. was forecasting system demand to fall to around 2.3 Bcf/d by Sunday, down from about 2.6 Bcf/d Friday and well below demand levels approaching 4 Bcf/d during last month’s price spikes.
SoCal Citygate tumbled 29 cents to $2.51. SoCal Border Average gave up 12 cents to $2.15, with NGI’s MidDay Alert Friday showing a 22-cent drop at SoCal Border-Ehrenburg.
Further upstream in West Texas, prices sold off across the board for a second straight trading day. Waha gave up 18 cents to average $1.88.
OPIS analyst Rishi Iyengar said the firm’s models showed Lower 48 demand totaling 79.3 Bcf/d Friday, down 6.8 Bcf/d from Thursday.
“Residential/commercial demand is seeing declines of at least 1 Bcf/d in each of the Northeast, Southeast and Midcontinent regions, where population-weighted temperatures are averaging more than two degrees warmer Friday,” Iyengar said. “Power demand is also down by nearly 2 Bcf/d, led by decreased power burn in the Southeast region.”
Temperatures over the weekend were expected to “average 2.5 degrees warmer than March 9 temperatures,” with OPIS forecasts showing Lower 48 demand averaging 74.2 Bcf/d over the weekend.
Meanwhile, Lower 48 production for Friday’s gas day came in at 77.8 Bcf/d, down 0.2 Bcf/d day/day, according to Iyengar.
The Northeast was expected to get a break over the weekend as the region recovered from a midweek nor’easter that brought heavy winds and multiple feet of snow in some areas.
Algonquin Citygate gave up 45 cents to average $3.32, while Tennessee Zone 5 200L dropped 16 cents to $2.72.
“A weather system with rain and snow showers will exit the Northeast later” Friday, “but still with chilly conditions for strong demand,” NatGasWeather said in its one- to seven-day outlook Friday. “A brief break will follow this weekend across the eastern U.S. ahead of another strong weather system and cold blast for early and mid-next week with another round of rain and snow.
“The southern U.S. will be mostly mild with 60s to 80s, while the West will be cool to mild over the Northwest and mild to warm over the Southwest. Overall, demand will be strong with the system over the East to end this week and the new one next week.”
AccuWeather forecasters were calling for a storm bringing snow, strong winds and rain to sweep across the Mid-Atlantic Sunday and Monday.
“The first part of the storm will bring drenching rain, localized severe weather and travel disruptions to the southern United States this weekend,” AccuWeather senior meteorologist Alex Sosnowski said Friday. “...In order for the storm to turn northward and produce a broad swath of heavy snow from Washington, DC, to Boston, the jet stream will have to dramatically change position from a northwesterly flow to a southwesterly flow.”
According to Sosnowski, mountainous areas in Virginia, West Virginia, North Carolina, Tennessee and Kentucky were the most likely to see heavy snow accumulation from the latest storm to crash into the East Coast this month.
“Farther to the northeast, including the Washington, D.C., area, a combination of rain and snow is likely in eastern Virginia, eastern Maryland, Delaware and southern New Jersey,” Sosnowski said. “This portion of the lower mid-Atlantic coast has potential for snow to fall at a heavy rate. How much, if any, snow accumulates in this area will depend on the strength of the storm and whether or not temperatures dip into the low to middle 30s or spend most of the time in the 40s.”
Transco Zone 5 gained 8 cents Friday to $2.82, while Transco Zone 6 New York added 6 cents to $2.85. In Appalachia, Tetco M3 Delivery climbed 10 cents to $2.73.