After a bit of choppy trading, natural gas futures closed out the week on stronger footing after an earlier slide into the red. The September Nymex gas futures contract settled Friday at $2.448, up 9.6 cents on the day. October moved up 7.0 cents to $2.573.
Spot gas prices were mostly lower despite warmer weather set to move into the eastern United States by Monday. NGI’s Spot Gas National Avg. fell 9.5 cents to $2.070.
After an eventful week in which prices rallied early and then gave up some ground following a bearish storage report, traders had several things work in their favor on Friday. Liquefied natural gas (LNG) demand, which has gradually increased over the past couple of weeks, moved past the 5 Bcf/d mark on Friday.
“What could matter more is weekend LNG feed gas trends and if they are able to increase over 5 Bcf/d,” said NatGasWeather. “This makes holding over the weekend quite risky with a gap open likely and volatile trade after.”
Thursday marked the cancellation deadline at Cheniere Energy Inc.’s LNG facilities and although the company has not provided details, a Bloomberg survey of traders expected fewer than 10 U.S. cargoes would be canceled for October delivery.
“The scuttlebutt is bullish for September and even more so for October,” said EBW Analytics Group.
BofA Global Research analysts pointed out that although global inventories are sitting at the highest level ever for this time of the season, injections have slowed slightly in recent weeks. That’s partly because of the U.S. heat that has increased domestic gas use and trimmed recent builds, while more LNG cargo loadings in September could slow injections even further.
“We do not think there is much risk of congestion and resulting price collapse in October, and October prices around the world have recovered recently to reflect that,” said the BofA research team.
Moreover, once beyond the seasonal peak in inventories, LNG demand should see the “largest seasonal ramp up ever,” from 27 million tons in August to 37 million tons in December. “This sequential tightening in the global LNG balance in winter should push December Japan Korea Marker prices above $6/MMBtu, currently trading at $5.10,” the BofA researchers said.
Nevertheless, there are a couple of potentially painful months to get through when moderate weather stands to give U.S. stocks a big push ahead of winter. The U.S. Energy Information Administration (EIA) said inventories for the week ending Aug. 14 rose by 43 Bcf to 3,375 Bcf, which is 595 Bcf above year-ago levels and 442 Bcf above the five-year average.
Genscape Inc. natural gas analyst Eric Fell said when compared to degree days and normal seasonality, the reported 43 Bcf injection appeared loose by 1.7 Bcf/d.
Recent weather data has trended hotter across the northern United States for next week, although the projected demand gains were to be partially countered by an expected loss of demand across the southern part of the country as a pair of tropical systems take aim at Florida and the Gulf Coast.
Two of the biggest operators in the deepwater Gulf of Mexico (GOM), BP plc and Royal Dutch Shell plc, had begun evacuating employees from platforms and rigs.
BP also was shutting in production from its four operated platforms, Atlantis, Mad Dog, Na Kika and Thunder Horse. The company was “securing offshore facilities” and had “begun the process of evacuating personnel,” spokesperson Megan Baldino told NGI.
Shell spokesperson Cynthia Babski told NGI that as a precautionary measure, “nonessential personnel on board some of our offshore assets” were being evacuated “as work activities and conditions allow.”
Work was underway to secure Shell’s drilling operations, but there were no impacts to production as of Friday afternoon. Updates were scheduled to be published twice a day on Shell’s Storm Center website.
The National Hurricane Center (NHC), in its Friday afternoon update, said on the forecast track, Tropical Storm Laura would move near or over Puerto Rico Saturday morning, and near the northern coast of Hispaniola late Saturday and early Sunday. Tropical Depression 14, which would become Marco if it strengthens as expected, was on track to approach the east coast of the Yucatan Peninsula of Mexico on Saturday before moving over the central GOM toward the northwestern Gulf on Sunday and Monday, NHC said.
Farther north, much of the data still favored comfortable air advancing into the region late in the week into the start of September to ease national demand to the lightest levels since the start of summer, according to NatGasWeather. However, models were struggling on exactly how these tropical cyclones will play out, “and that’s likely to lead to big weather changes over the weekend with the potential for either hotter or cooler trends for late August,” the forecaster said.
News of a pipeline explosion in Corpus Christi, TX, also rattled the markets on Friday. The U.S. Coast Guard (USCG) rescued two crewmembers and continued searching for four missing crewmembers of the Waymon L Boyd dredging vessel after it caught fire in the Port of Corpus Christi (POCC) at around 8 a.m. The USCG then closed the Inner Harbor from the Harbor Bridge inward of the Corpus Christi Ship Channel.
The private, third-party dredging vessel struck a submerged propane pipeline owned by Enterprise Products Partners LP. The pipeline, part of Enterprise’s South Texas system, was immediately isolated, and only a small supply was moving through the line as of Friday afternoon, spokesperson Rick Rainey told NGI. Enterprise planned to conduct an investigation into the cause of the incident, and “we’ve got personnel onsite coordinating with regulatory authorities and emergency responders.”
The POCC this month started the second phase of the Channel Improvement Project (CIP), but the dredging vessel involved in the incident was not part of the fleet operated by Callan Marine Ltd., which was tapped to carry out the project.
Heading into the new week, there is a lot for the gas market to consider, according to Bespoke Weather Services. In addition to monitoring production, LNG and U.S. gas demand in the wake of the tropical storms, the market needs to see if power burns weaken even more at this price level. Add in the usual uncertainty heading into a contract expiration, and Bespoke said the market has “the recipe for more wild volatility.
“We still feel the front is getting a little expensive, but need to assess the weekend data to see what it brings.”
Spot gas markets ended the week mostly in the red as the looming storms were set to increase cloud cover along the Gulf Coast, while comfortable conditions continued across the northern United States for a couple more days.
The National Weather Service (NWS) said a persistent upper-level trough over the Deep South and a stalled frontal boundary over the Southeast should trigger scattered showers and thunderstorms. There also is a threat for excessive rainfall in the southern Appalachians, while farther north, a pair of frontal boundaries should spark showers and storms in the Upper Midwest and New England.
More rain was expected throughout the weekend from the Tennessee and Ohio valleys to the Mid-Atlantic coast and in the Upper Mississippi Valley and northern Great Lakes, according to the NWS. However, as a system moves across southeast Canada, record high temperatures were possible for southern New England and the northern Mid-Atlantic states by Monday, the forecaster said.
The prospect of record heat fueled some of the only spot market gains seen across the Lower 48. Transco Zone 6 NY prices for gas delivered through Monday were up 8.5 cents to $1.290, but prices at New England’s Algonquin Citygate stayed flat at $1.445.
Much of the West and Plains were being blanketed by a cloak of smoke from wildfires that extended from the Rockies to the West Coast, the NWS said. Elevated risks for fire weather conditions continued in portions of the Northwest and northern Great Basin and in/near the Northern Rockies as gusty winds and low relative humidity levels persisted. Record high temperatures were slated for parts of the Southwest, the Rockies and West Texas through Sunday, NWS said.
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