Natural gas prompt-month futures inched higher Wednesday ahead of a government storage report expected to show an unusually long withdrawal season lasting one more week. In the spot market, declines along the East and West coasts countered gains in Texas, and the NGI National Spot Gas Average shaved off 3 cents to $2.44.
The May contract -- set to expire Thursday -- added 0.5 cents to settle at $2.786 after trading as high as $2.798 and as low as $2.755.
Heading into the May contract’s expiration Thursday, an expiration that coincides with the weekly release of the Energy Information Administration’s (EIA) storage report, “uncertainty is now quite high,” according to Bespoke Weather Services.
“Continued firm cash could bring about a strong expiry, though a lagging strip indicates that the May contract will struggle to hold above the $2.80-$2.82 resistance level,” the firm said. “The winter strip offered a bit more support Wednesday, but this does not appear to be a market that wants to make another major move higher unless we add” more weather-driven demand or EIA’s storage report “data misses bullish again.
“We are maintaining our neutral sentiment mainly because of the limited confidence a combined contract expiry and EIA day will bring; this comes after a very bullish miss last week in EIA data that has resulted in a wider spread in estimates for the print this week,” Bespoke said. “Another bullish miss (draw in the upper teens or higher) could bring about a very strong expiry, while a bearish miss (mid single digit draw or smaller) could weaken the whole strip and show last week’s very tight print as somewhat of a fluke.”
Estimates for EIA’s 10:30 a.m. ET storage report point to the withdrawal season extending another week -- and well past the typical start of injections.
A Reuters survey of traders and analysts on average predicted a 12 Bcf withdrawal for the week ending April 20, with responses ranging from a pull of 22 Bcf to a 9 Bcf injection. A Bloomberg survey produced a median withdrawal of 11 Bcf, with responses ranging from a 22 Bcf pull to a 5 Bcf build.
Last year, 71 Bcf was injected, while the five-year average is a build of 60 Bcf.
OPIS PointLogic this week said it expects EIA to report an 11 Bcf withdrawal.
“Although this is down by 25 Bcf from the prior week’s draw, owing to warmer weather across the U.S. Lower 48, a withdrawal for this time of year is highly unusual,” the firm said. “The withdrawal would reduce inventories to 1,288 Bcf and increase the storage deficit against the five-year average to 520 Bcf.”
IAF Advisors analyst Kyle Cooper called for an 18 Bcf withdrawal, while Price Futures Group Senior Analyst Phil Flynn called for an injection of 5 Bcf. Intercontinental Exchange EIA storage futures settled Tuesday at a withdrawal of 14 Bcf for the upcoming report.
Meanwhile, NatGasWeather.com noted “slight cooler changes” over the next two weeks in the midday weather data Wednesday “but still an overall comfortable pattern across most of the country, with widespread highs of 70s and 80s and light demand. The data is mostly colder around May 4-5 as the models lock onto a weather system tracking across the northern U.S., although a relatively minor change due to the time of the year.”
Turning to the spot market, prices in the Northeast and Appalachia weakened Wednesday amid expectations for temperatures to moderate in the region over the next few days.
Radiant Solutions was forecasting temperatures to climb to around 5 degrees warmer than normal in Boston and New York Thursday, with highs in the 60s.
Algonquin Citygate fell 8 cents to $2.72, while Transco Zone 6 New York gave up 21 cents to average $2.44.
Further upstream in Appalachia, Dominion South shed 8 cents to $2.32, while Tetco M2 30 Receipt dropped 8 cents to $2.27.
FERC on Wednesday gave Rover Pipeline LLC the OK to start-up part of its second and final phase, bringing the 3.25 Bcf/d Appalachian takeaway project a step closer to full service.
In an order posted to the project docket, Federal Energy Regulatory Commission staff authorized Rover to commence service on its Mainline Compressor Station 3 and the segment of its Mainline B running between the second and third of Rover’s mainline compressors. This partially grants a request the company had submitted April 13, with Rover’s Defiance Compressor Station, Market Segment and Vector Delivery Meter Station still awaiting FERC’s go-ahead.
The in-service request for the other facilities is still under evaluation, according to FERC.
In March, FERC staff took issue with delays in the completion of restoration work at Rover’s Mainline 1 and Mainline 2 compressors, warning that future in-service authorizations could be impacted.
In West Texas, a number of points posted double digit gains, led by Transwestern, which jumped 21 cents to $1.65 Wednesday. Waha climbed 15 cents to $1.50.
Transwestern declared a force majeure Tuesday that was expected to impact more than 250 MMcf/d of Permian volumes, according to Genscape analyst Joseph Bernardi.
“Unplanned repairs began Tuesday to address a damaged pipe segment between Carlsbad, NM and Kermit, TX,” Bernardi said. “Transwestern’s Force Majeure notice stated that five affected points would be shut in beginning with Tuesday’s Intraday 3 cycle, with a return to normal operating capacity expected by Thursday’s Evening cycle.
“These points averaged a net receipt of over 250 MMcf/d in the month before this maintenance. The largest of these, the Agave Rojo Banco interconnect with Agave Energy Co. in New Mexico, averaged a receipt of 180 MMcf/d in the prior month.”
In California, SoCal Citygate dropped another 58 cents to average $2.94 after spiking more than $2 to average $4.38 in Monday’s trading.
Portland, OR-based Energy GPS said the price spike at SoCal Citygate this week correlated with electricity demand in the California ISO (CAISO) exceeding projections.
“As we sat down this week, the temperatures were expected to warm up across the Desert Southwest and the southern part of California. As expected, the day-ahead load profile within the CAISO footprint shifted up to a point that Tuesday’s peak hit 28.6 GW,” Energy GPS said. “This is roughly 2 GW higher than what we saw on April 17 and just under 3 GW higher than what we saw on Sunday. As a result, the intraday SoCal Citygate prices on Monday started to soar as the real-time loads” exceeded the day-ahead forecast.
“...It has been a common trend as of late for the actual demand to come in higher than the day-ahead forecast and schedules,” according to the firm. “Looking at the supply/demand picture, the only place for incremental supply to come from is within” Southern California Edison and San Diego Gas & Electric’s “balancing territory as the quick-fired generation needs to respond to balance the grid. When this occurs, the unit’s source for natural gas is SoCal Citygate.”
As gas spreads between SoCal Citygate and surrounding points widened, electricity transmission patterns showed generation increasing “within PG&E’s system to help serve load in the southern part of the CAISO footprint.” This reduced gas demand further south, pushing down SoCal Citygate prices Tuesday as spot prices at PG&E Citygate increased, according to Energy GPS.
PG&E Citygate shed 5 cents to average $2.70 Wednesday, while SoCal Border Average dropped 10 cents to $2.11.