- June settles at $2.810, down 3.7 cents
- “We’ll need another stimulus” to punch through $2.85-2.90, says Powerhouse’s Thompson
- Forecast for late May/early June seen cooler in “slight bearish trend compared to late last week”: NatGasWeather
- SoCal Citygate adds 64 cents d/d, reversing Friday’s decline
Natural gas futures retreated Monday as forecasters called for somewhat cooler temperatures for the first part of June. In the spot market, more maintenance in Appalachia and the Northeast coincided with mixed price action, while points strengthened in the Midwest; the NGI National Spot Gas Average added 7 cents to $2.40/MMBtu.
The June contract settled 3.7 cents lower at $2.810 Monday after trading as high as $2.847 and as low as $2.806. July settled at $2.850, down 2.9 cents on the day.
“It wasn’t, in essence, a wipeout day just because we were down a little bit,” Powerhouse Vice President David Thompson said of Monday’s sell-off. “You had two days of pause” after last Thursday’s rally, “and today paused at a slightly lower level.”
With forecasts as of Monday showing a slightly impressive start to June in terms of cooling demand, Thompson said the question now is whether the bulls can punch through resistance in the $2.85-2.90 area.
“We’ll need another stimulus,” he told NGI. The market has already priced in the prospect of a warmer-than-normal start to June, so before it can go higher “it’s going to need another piece of information.”
The midday weather data Monday maintained “slightly cooler changes over the southeastern U.S. for the end of May into the first few days of June,” according to NatGasWeather.com, which called this a “slight bearish trend compared to late last week as it would result in showers with highs of 80s over this important region instead of lower 90s. It will still be very warm over most of the country going forward, just not as hot as would be required to impress.
“...Going forward, the pressure remains on production reducing deficits instead of weather patterns increasing them, although temperatures of 90s will need to gain ground over the South and East during the first two weeks of June or the markets could quickly become disappointed, giving bears hope strong production will eventually gain the upper hand over weather patterns,” NatGasWeather said.
Meanwhile, Williams Capital Group on Monday revised its commodity price deck based on a more constructive outlook for West Texas Intermediate (WTI) crude oil and a “downward bias” for natural gas prices through 2020, echoing a price forecast issued late last month by Raymond James & Associates Inc.
“With the recent oil price rally and increased optimism around the supply/demand picture, we raise our 2018, 2019 and 2020” WTI “assumptions by 7.5%, 12.9% and 7.7% to $67.97/bbl, $70.00/bbl and $70.00/bbl, respectively,” Williams Capital Group senior equity analyst Gabriele Sorbara said.
“Conversely, we lower our 2018, 2019 and 2020 Henry Hub natural gas assumptions by 0.9%, 5.0% and 5.0% to $2.88/Mcf, $2.85/Mcf and $2.85/Mcf, respectively. As for our long-term pricing assumptions (2021 and beyond), we raise our WTI crude oil price to $70.00/bbl (from $65.00/bbl) and reaffirm our natural gas price assumption of $3.00/Mcf.”
Turning to the spot market, with more shoulder season maintenance work expected to impact the region this week, Northeast and Appalachian prices were mixed Monday.
Transco Zone 6 New York jumped 26 cents to $2.72. Further upstream in Appalachia, Transco-Leidy Line surged 48 cents to $1.32, while Dominion South fell 5 cents to $2.20.
Pigging work scheduled for Tuesday and Thursday “will bring massive reductions to the Columbia Gas Leach XPress system” this week, Genscape Inc. analyst Molly Rosenstein told clients Monday. “Genscape anticipates reductions exceeding 1,100 MMcf/d and 1,000 MMcf/d, respectively, with the majority of the impact falling on producers.
“Total production receipts from Majorsville, Gibraltar III, Stagecoach-LXP and Eureka cannot exceed 350 and 450 MMcf/d each day, respectively,” Rosenstein said. “Cumulatively, these locations averaged 1,287 MMcf/d receipts prior to Leach XPress pigging work that began last week.”
Majorsville could reroute volumes onto Texas Eastern (Tetco) and Eureka could reroute via Rockies Express (REX), but Gibraltar III and Stagecoach have more limited reroute options, according to Rosenstein, who noted that the pigging work is expected to conclude by Friday.
Meanwhile, Tetco is expected to conduct three outages starting Tuesday impacting its M2 and M3 market zones, according to Genscape analyst Josh Garcia.
“First, it will conduct a pipe replacement on the 30-inch South Line out of M2, which is already constrained by existing maintenance,” Garcia said. “This further reduces capacity through the line by up to 124 MMcf/d from Berne 30-inch South compressor station to the Barton South Compressor Station until Friday,” about a 185 MMcf/d reduction versus month-to-date max flows through Barton South.
Tetco’s 36-inch diameter South Line in M3 in southern Pennsylvania is expected to see two outages starting Tuesday that affect compressor stations at Bedford and Chambersburg. These outages are expected to cut operational capacity between the Bedford Compressor Station and the Heidlersburg Compressor Station by up to 300 MMcf/d, while capacity through the Chambersburg Compressor Station is expected to be limited by 161 MMcf/d, according to Garcia.
“The maintenance at the 30-inch South Line creates bearish pressure on M2 prices as it forces producers to compete to move gas out of the constrained line,” Garcia said. “The southern 36-inch line in M3 has not had any significant maintenance since the beginning of May, and flows are currently unconstrained due to low shoulder season weather demand, and current forecasts do not show that changing yet. As such, this event will not be impactful unless an extraneous event causes demand to spike significantly.”
Tetco M2 30 Receipt gave up 3 cents Monday to average $2.19.
“There will be numerous weather systems with areas of showers impacting the U.S. this week, but still quite comfortable with highs mainly in the upper 60s to near 80 degrees” further north, “with 80s to lower 90s over the southern U.S. for regionally stronger demand, especially over Texas into the South,” NatGasWeather said Monday. “Areas of showers will continue late in the week through the coming weekend, focused over the West and Southeast.”
Midwest prices strengthened Monday as Radiant Solutions was forecasting above normal temperatures for major cities throughout the region later this week, including highs in the mid-80s to low-90s in St. Louis over the next several days. After slightly chillier temperatures Monday, Radiant was calling for Chicago to see temperatures warm up into the 80s by the end of the week.
Joliet added 9 cents to average $2.55, while in the Midcontinent, Northern Natural Ventura surged 22 cents to $2.49.
The ANR Pipeline on Monday said it would begin unplanned maintenance this week at the Joliet Compressor Station on its Michigan Leg South in the pipeline’s Northern Area. ANR is limiting scheduled nominations at the Joliet (NGPL) receipt point to 15,000 Dth starting Wednesday and continuing through the end of the month.
ANR said based on current nominations it expects the maintenance to curtail IT and Firm Secondary nominations.
In the West, the constrained SoCal Citygate reversed steep losses from Friday by adding 64 cents to average $2.70. Southern California Gas was forecasting system demand to tick higher to start the week, up to around 2.1-2.2 Bcf/d over the next few days from around 1.9 Bcf/d Sunday.
Radiant Solutions on Monday was calling for slightly below normal temperatures in Burbank, CA, this week, averaging in the low- to mid-60s.
Elsewhere in the region, SoCal Border Average climbed 15 cents to $1.97, while PG&E Citygate added 6 cents to $2.95.
Genscape was forecasting demand in California and Nevada to pick up to around 6 Bcf/d Tuesday after hovering around 4.3 Bcf/d over the weekend.