- May settles at $2.752, up 1.7 cents
- Price action “showed a loss of momentum for the bulls,” says Powerhouse’s Thompson
- Short-term cold trends supportive but long-range heating demand moderate: Bespoke
- SoCal Citygate up 98 cents amid demand gains to start week
Natural gas futures gained for the fourth straight session Monday as April cold and the prospect of an extended withdrawal season remained supportive.
Meanwhile, helped by a spring storm over the weekend and cooler temperatures expected this week, spot prices mounted an impressive run higher Monday, with the gains focused in the Midwest and Northeast; the NGI National Spot Gas Average jumped 42 cents to $3.01/MMBtu.
The May contract settled at $2.752, up 1.7 cents to build on Friday’s 4.9-cent rally. June settled 2.0 cents higher Monday at $2.784.
Even though futures built on Friday’s 4.9 cent rally, Monday “showed a loss of momentum for the bulls,” said Powerhouse Vice President David Thompson. Monday’s settle came in just below the open price “and well off the high of the day. So I would not call it an enthusiastically bullish day.
“...If Tuesday we also showed some weakness, then I suspect we start to retrace the gains of Wednesday, Thursday and Friday of last week in short order.”
On the other hand, if Monday proved to be a pause before another move higher, then look for the recent front month high of $2.811 set back in March to serve as a breakout target, Thompson told NGI.
Bespoke Weather Services said futures gained on strong cash prices Monday “before gradually pulling back into the settle.” Further bullish catalysts from fundamentals appear “relatively unlikely, as we are seeing short-term colder trends that may support cash prices but are also still seeing long-range forecasts moderate with heating demand falling back toward average.
“This is a trend that is likely to continue” with a lingering Madden-Julian oscillation pulse “moving into more bearish phases, while production limits any other bullish fundamentals.”
According to NatGasWeather.com, “The overnight and midday weather data held colder trends across the Northeast late this week but was little changed after as weather systems track across the country every few days with mild to warm temperatures out ahead of them and slightly cool conditions as they pass...we continue to view the data as trending from bullish this week to a rather seasonal and neutral pattern the last week of April with near normal demand.”
In the spot market, Midwest and Northeast prices surged as severe weather was sweeping through the Great Lakes and Northeast Monday.
Calling it a “historic April snowstorm,” OPIS by IHS Markit analyst Alan Lammey reported “widespread below average temperatures and wintry weather” across much of the eastern half of the United States over the weekend, including record-setting snow in Minneapolis.
“In the wake of this system, temperatures are upwards of 30 degrees colder than average in some U.S. locations,” Lammey said. “Looking ahead, more below normal temperatures are on tap over the next five-day period before conditions begin to moderate” during the six- to 10-day forecast period.
The firm’s one- to five-day outlook Monday called for a forecast mean population-weighted nationwide temperature of 51.7 degrees, 5.9 degrees colder than normal. The firm was calling for major Midwest cities to see daytime highs around 20 degrees colder than average.
“Along the Eastern Seaboard, the 70s and 80s of late last week are now in the rearview mirror with areas from Washington, DC, to Philadelphia presently seeing highs only reaching the low 60s, while New York City to Boston will top out in the mid-50s, each upwards of 10 degrees colder than average,” Lammey said. “For the most part, weather-related natural gas demand will remain underpinned as the unseasonably cold air mass continues to shift eastward.”
The Midwest Regional Average climbed 64 cents Monday after adding 26 cents in Friday’s trading. Monday’s gains included a 79-cent increase at Joliet, which ended at $3.61. The strengthening cash prices extended to the Midcontinent as well, where Northern Natural Demarcation jumped 39 cents to $3.16, while Northern Border Ventura added 82 cents to $3.59.
Genscape Inc. said Monday it expects “modest support” for spot prices this week from a combination of lingering heating demand and a decrease in production. “On the demand side, the weather system that pummeled the Midwest this weekend will migrate eastward towards the eastern Midwest, Northeast and Southeast/Mid-Atlantic markets, causing heating degree days (HDD) to linger well into baseball season.
“California, Pacific Northwest and Rockies will also revert to HDD territory this week. As a result, Genscape’s macro supply/demand is pegging this week’s demand in the 72 Bcf/d range, right in line with last week’s runs.”
As for supply, colder-than-normal weather in Alberta could limit imports from Canada to less than 6 Bcf/d. “Lower 48 production is also down,” Genscape said. Affiliate “SpringRock’s daily pipe production estimate is showing weekend volumes came in about 0.86 Bcf/d below last week’s record-setting 79 Bcf/d mark. The largest declines off the high are in the Northeast, led by seasonal maintenance-induced drops in Northeast Pennsylvania and West Virginia.
“Gulf region volumes are also down, about 0.3 Bcf/d, primarily due to lower throughput through the Venice processing plant,” according to the firm. “Declines out of the New Mexico portion of the Permian are also contributing to the overall drops. Those look to be primarily associated with producer under-performance on the Transwestern system.”
In the Northeast, the volatile Algonquin Citygate rocketed $2.80 higher to average $6.60, while Transco Zone 6 New York ended up adding 19 cents to $3.00. In Appalachia, Dominion South tacked on 18 cents to $2.49, while Tetco M3 Delivery surged 66 cents to $2.90.
Following maintenance in M2 and M3 last week, Texas Eastern Transmission Co. (Tetco) “will be conducting another round of maintenance in M2 and M3,” Genscape told clients Monday. “First, it will conduct several successive maintenance events on the Tompkinsville, Athens and Wheelersburg compressors from April 17-27. Based on max flows from the last 30 days, north to south flows on the 30-inch South Line will be limited by as much as 475 MMcf/d.”
Meanwhile, maintenance events in Pennsylvania on Tetco’s Lines 1 and 2 from Uniontown to Bedford beginning Tuesday (April 17) through April 24 could limit flows from Bedford to Heidlersburg by up to 767 MMcf/d based on 30-day max flows, Genscape said.
Transco was also scheduled to start maintenance on its Leidy Line Monday, which is expected to continue through April 26, impacting about 364 MMcf/d of flows on the line, according to the firm.
“In isolation, the outages on the 30-inch South Line create bearish pressure on M2 and M3 as it restricts the other main outlet of M2 gas, and the Uniontown to Bedford and Leidy events create bullish pressure for M3 and Transco Zone 6 as supply gets cut on major demand markets,” Genscape said. “Northeast temperatures are forecasted to remain cooler than the 30-year average for the next two weeks.”
In California, SoCal Citygate spiked 98 cents to average $4.10 as Southern California Gas Co. (SoCalGas) was forecasting demand to pick up to start the workweek. After recording system demand totaling around 2.1 Bcf/d Sunday, SoCalGas was calling for demand to climb to just under 2.6 Bcf/d by Tuesday, exceeding projected receipts of a little under 2.5 Bcf/d.
Further upstream in West Texas, a number of points pulled back after widespread gains the prior two trading days. Waha tumbled 22 cents to $1.94.