Natural gas futures rallied Monday as forecasts for warmer-than-normal May temperatures provided support for the bulls following last week’s storage-driven gains. Spot prices strengthened across most regions amid expectations for higher cooling demand this week; the NGI National Spot Gas Average climbed 13 cents to $2.39/MMBtu.
The June contract gained 3.6 cents to settle at $2.842, near the intraday high of $2.847. The July contract settled at $2.859, up 3.4 cents on the day.
“We have nominally broken out of the range” after closing above the previous intraday high of $2.839 set April 26, Powerhouse Vice President David Thompson told NGI. “We have made a new high for this movement, so it bears watching. We’ve been in a nice stealthy uptrend since that last significant low in March.”
Still, Thompson said he doesn’t see Monday’s rally as “the precursor to a major move...but from a purely technical point of view, if we got a little more follow-through” on Tuesday “I think you’d see some technical buyers come in.”
Monday’s move higher followed a leaner-than-expected Energy Information Administration (EIA) storage report last week “and steady weather forecasts over the weekend” that have showed supportive levels of cooling demand into the end of May, according to Bespoke Weather Services said.
“Yet those appear to be the primary catalysts at these levels, as nuclear outages remain quite low and we are unsure that we can add many more” gas-weighted degree days (GWDD) under current weather patterns, Bespoke said. “...Most other fundamental developments over the past few days have not been particularly supportive, and we are not sure we see any clear catalysts to move above $2.87, as we would likely need to add a decent number of GWDDs to see that break.
“Additionally, afternoon European guidance showed some of the cooling trends later in May that we are worried could pull prices back from resistance. All of this has us seeing any test of $2.85-2.87 as an opportunity to gain short exposure.”
The Desk’s Early View survey for this week’s EIA report showed respondents on average estimating a 107.7 Bcf build, with a median of 105 Bcf. Last year, EIA recorded a 64 Bcf build for the period, and the five-year average is an 87 Bcf injection.
Turning to the spot market, as Radiant Solutions was forecasting widespread coverage of warmer-than-normal temperatures in its one- to five-day outlook Monday, prices picked up across most of the Lower 48 to kick off the new work week, including gains of around 10-20 cents throughout Texas, Louisiana, the Midwest and the Midcontinent.
Radiant Solutions was calling for above-normal temperatures over the next several days across major population centers including St. Louis, Memphis, Dallas and Houston.
Genscape Inc. natural gas analyst Rick Margolin said his firm expects a quiet week in terms of demand.
“Though power burns should inch up into the 26-27 Bcf/d range with” cooling degree days “on the rise, we’re not seeing any major breakouts in any regional markets,” Margolin said. “No major swings expected in” liquefied natural gas “sendouts or exports to Mexico either. On the flip side of the ledger, production is ticking upward to the upper 78 Bcf/d area and should continue to rise as shoulder season maintenance events wind down over the next couple weeks.
“Imports from Canada continue to pace last year same-date levels, held back only by ongoing maintenance at the Alberta borders,” Margolin said. “With supply health and no major boosts in demand expected this week, preliminary estimates for the next few storage weeks show solid 100 Bcf-plus injections.”
According to NatGasWeather.com, this week should see “several weak weather systems tracking across the northern U.S.” bringing “showers and thunderstorms but only with slight cooling. The southern U.S. will be very warm to hot with highs of mid-80s to lower 90s for moderate early season cooling demand, although there’s a stalled weather system near the Gulf Coast that will bring heavy showers.”
Shoulder season maintenance remains in full swing in the Northeast, as a number of pipeline operators are planning work this week that could impact flows through the region, according to a roundup Monday from Genscape analyst Molly Rosenstein.
“Millennium will be performing maintenance in southern New York Tuesday through Saturday that may cause supply scarcity for the New England markets and shut in up to 1,000 MMcf/d of production,” Rosenstein said. “Additionally, the Wagoner West segment will be reduced by 400 MMcf/d from recent seven-day average flows. The gathering locations Sandford and Laser Midstream...will have zero receipts during this time.”
Limited reroute options could contribute to basis volatility for Algonquin Gas Transmission (AGT) and Tennessee Gas Pipeline trading points, Rosenstein said.
Further downstream, maintenance on AGT’s Burrillville compressor station near Boston is expected to limit throughput capacity to 497 MMcf/d from Tuesday through May 23. Month-to-date flows through Burrillville have not exceeded 393 MMcf/d, though last May flows peaked at 665 MMcf/d, according to Rosenstein.
Further upstream in Appalachia, Millennium East Pool, Tennessee Zone 4 Marcellus and Transco-Leidy Line each fell sharply for the second straight trading day. Millennium East Pool tumbled 31 cents to average 63 cents.
Millennium East Pool and Transco Leidy also saw their fixed price forwards for June fall by around 17% in Friday’s trading, according to NGI’s Forward Look.
Transco Leidy’s fixed price for June fell from $2.054 to $1.706 Friday, while Millennium East Pool dropped from $2.044 to $1.696, according to Forward Look.
Meanwhile, Columbia Gas (TCO) is expected to conduct a pigging run Tuesday on its new Leach XPress Pipeline that will shut in Gibraltar III and Majorsville for six hours, Rosenstein said.
While the Majorsville gas processing plant can reroute onto Tetco, “Gibraltar III does not have reroute capabilities,” she said. “The two have cumulatively supplied 688 MMcf/d on TCO, on average, the past seven days; 233 MMcf/d of this was non-firm capacity” likely to be cut entirely during Tuesday’s pigging run. “This will also affect throughput along Lone Oak A and B segments, but it will not likely affect any firm transportation.”
In the West, after dropping 66 cents in trading Friday, SoCal Citygate jumped 96 cents to average $3.17.
The import- and storage-constrained Southern California Gas (SoCalGas) was forecasting an uptick in total system demand and receipts to start the week. Demand was expected to increase from around 2 million Dth/d Sunday to around 2.3 million Dth/d over the next several days. SoCalGas was forecasting total receipts this week to come in just under 2.5 million Dth/d, versus actual receipts of around 2.3 million Dth/d on Sunday.
Other points in the region bounced back after seeing losses Friday. SoCal Border Average surged 25 cents to average $2.01, including a 31-cent gain at SoCal Border-Ehrenberg reported in NGI’s MidDay Alert. El Paso S. Mainline/N. Baja added 36 cents to average $2.11.
A number of maintenance events starting Tuesday could impact close to 400 MMcf/d of throughput on the El Paso Natural Gas (EPNG) South Mainline, according to Genscape analyst Joe Bernardi.
Testing and remediation work is expected to reduce operational capacity at EPNG’s “CORN LPW” meter by 388 MMcf/d until around Friday and Saturday, Bernardi said.
“But another batch of remediation beginning Sunday will keep operational capacity 264 MMcf/d below normal through the following Friday, May 25. This meter typically flows close to full, so the maximum flow cut could be nearly 400 MMcf/d,” Bernardi said.
“Some maintenance events on the South Mainline can lead to flow reroutes onto a different pressurized system, but the High and Intermediate Pressure meters at Cornudas are already both flowing essentially full. That said, EPNG has also allowed scheduled volumes to exceed posted operating capacity at ‘CORN LPW’ by as much as 85 MMcf/d as recently as last month.”