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Weekly Natural Gas Spot Prices, Futures Flounder Despite Supportive Winter Weather
Weekly natural gas cash prices crept lower even though seasonally cold temperatures and snowstorms spanned large swaths of the Lower 48.
NGI’s Weekly Spot Gas National Avg. for the March 13-17 trading period declined 29.5 cents to $2.720.
Conditions during the week were favorable for heating demand, with heavy snow and freezing air spreading from the Mountain West early in the covered period to the Midwest and Northeast as the week wore on.
However, with production estimates hovering around 98 Bcf/d much of the past week – down 2 Bcf/d from earlier in March – hints of easing supply offset weather-driven demand and kept cash prices in check.
Additionally, prices pulled back in California after cold pushed out of the state and mild weather settled in for much of the week. SoCal Citygate shed 63.0 cents to $7.340, while SoCal Border Avg. dropped $1.640 to $4.455 and PG&E Citygate lost $1.430 to $6.935. In related news, the California Public Utilities Commission on Thursday launched a multi-pronged investigation into this winter’s natural gas price spikes in California.
On the futures front, meanwhile, the April Nymex contract seesawed throughout the week and struggled to sustain momentum. While near-term weather conditions and a reboot of the Freeport LNG facility favored bulls, elevated storage supplies hinted at imbalance as the spring shoulder season draws closer.
The prompt month settled at $2.338/MMBtu to close the trading week on Friday, down 4% from the prior week’s finish.
Looking ahead, forecasters called for blasts of winter in the second half of March that could drive robust demand and eat into supplies.
National Weather Service projections showed several waves of freezing temperatures spanning vast expanses of the Lower 48 in the week ahead and near the end of March.
StoneX Financial Inc.’s Thomas Saal, senior vice president of energy, told NGI the late-season chills could drive above-average storage withdrawals and tighten inventories enough to provide price support in the second half of this month.
“As long as this winter hangs around, weather is going to be the key factor,” Saal said.
Uneven Futures Footing
Beyond the coming cold, Saal said traders took note of the lighter production levels during the past week. Some concluded that producers had begun to scale back amid futures prices that are half the level of late 2022, he said.
Others, however, think the return of liquefied natural gas demand from the Freeport facility in Texas skewed production estimates. The export facility is building back to full operations after a fire forced it out of commission last year. Feed gas volumes at the plant recently climbed by 1 Bcf/d as crews gradually work up to 2.38 Bcf/d capacity.
East Daley analysts said gas is being redirected south on Texas intrastate pipelines to Freeport LNG rather than flowing east to Louisiana. The change to intrastate systems impacts data because volumes transported within Texas do not appear in daily pipe scrapes, creating the illusion of lower supplies.
The opposing views on production contained the impact of lighter output estimates on futures during the week and, aside from weather, left markets to focus on storage surpluses that increased with the latest government inventory data. Weather was mild over most of January and February – and the start of March – leaving little need for stout storage pulls in 2023.
The U.S. Energy Information Administration (EIA) on Thursday reported a withdrawal of 58 Bcf for the week ended March 10. The five-year average for the period was a pull of 77 Bcf, and a year earlier, EIA posted an 86 Bcf draw.
Inventories stood at 1,972 Bcf, well above both the year-earlier level of 1,451 Bcf and the five-year average of 1,594 Bcf.
Chilly conditions over the past week – and expectations for more ahead – could trim those surpluses, Saal said. “We’ve got plenty of supply right now, so a little balance here at the end of winter could help” prices, he said.
Early withdrawal estimates submitted to Reuters for the week ended March 17 averaged 80 Bcf. That compares with a pull of 55 Bcf a year earlier and a five-year average decline of 45 Bcf.
Still, with spring around the corner, analysts said any boost to prices could prove short-lived.
“While the weather forecast continues to grind higher and the storage surplus may soon peak, the most pressing near-term challenge for natural gas bulls may still be defending technical support and averting the risks of another leg lower as near-term cold…ebbs into the end of March and early April,” said EBW Analytics Group’s Eli Rubin, senior analyst.
Friday Cash Prices
Spot natural gas prices on Friday for weekend through Monday delivery fell in the West and climbed in the East, as wintry weather pushed from the nation’s midsection toward New England and the Mid-Atlantic.
NGI’s Spot Gas National Avg. slid 3.5 cents on the day to $2.550.
Wood Mackenzie analyst Kevin Ong said the near-term cold shots could also interrupt production and affect gas flows in the Northeast. He said several pipelines issued operational flow orders ahead of the weekend, including Columbia Gas Transmission and Algonquin Gas Transmission.
Columbia Gas on Friday ticked up 4.0 cents day/day to average $2.210, while Algonquin Citygate jumped 85.0 cents to $3.200.
Elsewhere in the East, Cove Point climbed 32.0 cents to $2.700.
Out West, however, prices in the Rockies dropped. Opal lost 22.5 cents to $4.110 and Northwest Sumas fell 48.5 cents to $2.015.
NatGasWeather said that, over the weekend and early in the coming trading week, “a frosty upstream weather system over the western and central U.S. will sweep across” the country, ushering in freezing air “for a return to strong national demand.”
A milder break could emerge over the southern and eastern United States late in the week ahead. However, another bout of seasonally cold conditions is expected in the final week of March before retreating during the last couple days of the month, NatGasWeather said.
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