Shoulder-season volatility -- in both weather models and natural gas pricing -- continued on Tuesday as traders appeared unsure of what to make of the latest weather data, which reflected a return to cold weather in the long range but warmer weather through the medium term. The Nymex December gas futures contract, in its first day in the prompt-month position, settled at $3.187, down 1.1 cents on the day. January slipped 1.7 cents to $3.244.
Spot gas prices were mixed Tuesday as generally comfortable temperatures were expected to linger from the West Coast across to the Midwest, where cooler, though not exceptionally cold, temperatures were expected from there to the East Coast. The NGI Spot Gas National Avg. fell 10 cents to $3.02.
On the futures front, December prices were firmly in positive territory at the start of trading and climbed as much as 8.3 cents higher day/day as weather outlooks added gas-weighted degree days (GWDD) into long-range forecasts that would move them above the five-year average, thanks to a cold shot expected to drop across the center of the country before spreading east, forecasters said.
“There's much uncertainty with exactly how much cold air will ultimately arrive with this system, but the data has been a touch colder with it overnight and so far midday,” NatGasWeather said. “However, a zonal west-to-east flow across the country is still favored in most of the data Nov. 11-15 with weather systems bringing showers and minor cooling, but also with mild breaks between in a rather neutral set up with near-normal demand.”
Indeed, Bespoke Weather Services said some guidance has been consistent in broad warmth across the country for Week 3, “which fits with upstream tropical forcing signals and leads us to see long-range cold as fleeting and unlikely to strengthen much more, though it does add support,” chief meteorologist Jacob Meisel said.
In addition, power burns appeared to be loosening modestly and liquefied natural gas (LNG) exports were off Monday, which should keep pressure on prices with production at record levels, even as Canadian imports remain very low, Meisel said.
But while Monday’s dip in LNG exports could provide some near-term downside pressure on the market, an expected overall increase in exports this winter would provide more long-term structural support.
Last week saw the start of significant flows to the first train of Cheniere Energy Inc.’s Corpus Christi LNG facility in South Texas as it undergoes commissioning, according to global consulting firm Energy Aspects. Meanwhile, Cheniere’s Sabine Pass feedgas flows hit an all-time high on Oct. 24 at 3.5 Bcf/d, indicating the start of commissioning flows to the Louisiana export facility’s fifth train, the firm said.
“First LNG is expected at Train 5 by year-end, which makes it likely that it is receiving some gas now in advance of that timeline,” Energy Aspects said. The additional LNG feedgas flows have helped push structural demand higher as winter approaches, according to the firm.
“With commercial weather forecasts now calling for a return to warmth in November after a burst of cold at the end of the shoulder season, futures trading is likely to move in sympathy with forecasts,” Energy Aspects said.
Though its end-of-season forecast has inched back up toward 3.19 Tcf, that level will keep cash supported, especially as GWDDs increase in ensuing weeks and structural demand has shifted some 0.5 Bcf/d higher on new LNG demand, the firm said. “Ebb and flow in daily weather and the choppiness of pre-commissioning LNG flows will dictate the level of that support.”
Meanwhile, NatGasWeather said it would continue to look for when more impressive and sustained cold will push into the northern and eastern United States, as recent weather data has yet to suggest when to expect it. “With Lower 48 state production setting new records in recent days, the battle between bullish deficits and bearish production continues.”
While prices could continue to ease without sustained cold across the North and East, the forecaster said it continues to view the background state as bullish, especially when considering storage deficits are expected increase further off Thursday’s Energy Information Administration report. “Again, we continue to view $3.13-3.14 on December 2018 futures as strong support bears would need to take out to gain control,” NatGasWeather said.
Spot Gas Mixed Despite Pleasant Temps
Spot gas prices were mixed as a return to warmer weather in Texas and parts of the Southeast drove up cooling demand in those regions, while a break between cold weather systems in the East lowered demand and prices there, forecasts showed.
On the West Coast, most pricing hubs posted decreases of at least a nickel as mostly warm and dry conditions were forecast for California and the Southwest, according to NatGasWeather. Malin slipped 4.5 cents to $3.115, while Southern Border Avg. plunged 23.5 cents to $2.935. Double-digit declines were also seen in Arizona/Nevada and the Rockies, where Transwestern San Juan plunged 25.5 cents to $1.595 and Northwest Sumas tumbled by almost $7 to average $7.34.
Meanwhile, a force majeure declared Monday by Trailblazer Pipeline was limiting flows by close to 50 MMcf/d day/day, “but should not represent a significant decrease relative to previous month-to-date flows,” according to Genscape Inc. A problem with one of the two compressor units at Station 601 in northeast Colorado led Trailblazer to declare the force majeure, which limits operational capacity through Segment 10 to 854 MMcf/d and through Segments 20-40 to 782 MMcf/d.
Both of these operating cap values are either slightly above or close to the recent 30-day averages through these segments, although recent flows had been coming in higher, Genscape natural gas analyst Joe Bernardi said. “The largest potential cut is for flows through Segment 40,” where Monday’s flow was 825 MMcf/d, “representing a day/day flow cut of 43 MMcf/d.”
Trailblazer’s initial estimate was that repair work would take about a month.
The reduction in capacity was likely behind the nearly 20-cent dive in spot gas prices at NGPL Midcontinent, which dropped to $2.09. Trailblazer brings natural gas from Colorado into Nebraska, where the pipeline joins the Natural Gas Pipeline Company of America.
In the East, next-day gas came off sharply, given the milder weather expectations for Wednesday and Thursday, when daytime highs were forecast to climb into the 50s to 70s, according to NatGasWeather. The break in temperatures was expected to be brief, however, as forecasts showed a stronger cool shot with heavy showers pushing into the central United States out of the Northwest/Rockies during the second half of the week, and then into the East this weekend, the firm said.
In the Midwest, prices edged up a few cents at best, while slightly stronger gains were seen in Louisiana and most of Texas. The exception was in West Texas, where ongoing maintenance and soft downstream demand led to a plunge of 27 cents at Waha, which fell to $1.53.