After several relatively quiet sessions, natural gas futures rallied sharply Friday as forecasters puzzled over volatile models to piece together the long-range trends following intense short- and medium-range cold.
With wintry temperatures set to move into the East and more heating demand on tap for the week ahead, spot price gains were widespread heading into the weekend; the NGI Spot Gas National Avg. climbed 17.5 cents to $3.630/MMBtu.
After surging overnight heading into Friday’s session, the December Nymex futures contract traded as high as $3.824 before sliding back to settle at $3.719, up 17.6 cents on the day. The January contract settled at $3.721, up 16.8 cents, while February picked up 15.2 cents to $3.566.
Friday’s $3.719 settlement takes out the previous front month high recorded in January 2018, when the February 2018 contract settled at $3.631. That’s also the highest the front month settlement since December 2016.
Price risks over the weekend were looking “incredibly mixed” following Friday’s session, according to Bespoke Weather Services.
“It was another week of extreme model volatility, as after a huge gap higher on Monday prices held in a tight range,” Bespoke said. “Balances slowly tightened through the week with production off highs, Canadian imports falling off and power burns struggling to loosen more. This helped keep prices from breaking lower mid-week on warmer model trends.” Then on Thursday models began trending colder, setting up prices to “break out higher on major cash leadership” Friday.
“Into the weekend we now see risks as incredibly mixed; prices settled more than 10 cents off their highs as afternoon model guidance marginally warmed, but they also shot far above the $3.70 level we were looking for,” Bespoke said. “The market was in a state of fear this morning; with balances marginally tighter and risks that cold lingers, low storage means all that much more, and as cash prices shot higher futures followed.”
Weather models on Friday continued to show a milder break for much of the country Nov. 19-23, according to NatGasWeather.
“As far as weekend risk, most of the weather data is currently neutral to a touch bearish for Nov. 23-26, depending on the weather model,” with the Global Forecast System coming in colder than the rest of the data. “There will likely be very cold air over western Canada Nov. 23-26, but the data is unsure if it will be able to push across the border into the U.S. or not. If it were to do so, bullish sentiment would be expected” and Friday’s spike in the futures “might be justified.
“If it holds north of the border, the pattern is likely to be mild enough that sentiment for those days would be neutral to a touch bearish,” the forecaster said. “The current odds favor cold holding at the border by a slight margin.”
Meanwhile, on Thursday the Energy Information Administration (EIA) reported a 65 Bcf injection into U.S. gas stocks for the week ended Nov. 2, surprising to the high side of most estimates. That compares to a 22 Bcf build recorded in the year-ago period and a five-year average injection of 48 Bcf. Total Lower 48 working gas in underground storage stood at 3,208 Bcf as of Nov. 2, down 580 Bcf (15.3%) from last year and 621 Bcf (16.2%) below the five-year average, according to EIA.
“Expectations this week were clearly for a smaller build,” said Genscape Inc. analyst Margaret Jones. “...Compared to degree days and normal seasonality, the 65 Bcf injection is about 3.8 Bcf/d loose versus the five-year average. Next Thursday’s number will be one more build before a hefty draw as cold-weather demand ramps up” during the week ahead.
Physical prices for weekend and Monday delivery picked up across most of the country Friday with wintry conditions expected to for the populated East Coast over the weekend. Benchmark Henry Hub added 17.5 cents to $3.780.
Cold was expected to continue spreading across the southern and east-central United States Friday before pushing into the East over the weekend, according to NatGasWeather.
“With lows behind the cold front dropping into the teens to 30s, locally single digits, national demand will be well above normal,” the forecaster said Friday. “The next cold blast will drop out of southern Canada late this weekend, then rapidly advance down the Plains into Texas early” in the upcoming week, “then across the Great Lakes, Tennessee Valley and East.”
The National Weather Service (NWS) was calling for a surface cyclone to develop in the East, bringing “brief but heavy rain” headed for the northern Mid-Atlantic and into southern New England early Friday.
“Cold air wrapping around the low-mid level center of the system will support locally heavy lake effect snow from the upper peninsula of Michigan into northern Wisconsin and portions of Lower Michigan through early Saturday morning,” NWS said. “The storm system will quickly move northeast into Quebec for Saturday evening but cold and blustery conditions will be left in its wake across portions of New York and New England on Saturday, with light to moderate lake effect snow east of Lakes Erie and Ontario.”
ANR has begun flowing volumes on its Wisconsin South Expansion Project just in time for the arrival of winter cold following an Oct. 22 in-service authorization from FERC, Genscape Inc. analyst Vanessa Witte said.
“The Alliance/ANR interconnect showed an increased day/day of about 200 MMcf/d beginning Nov. 2, while flow through the Sandwich East and North meters increased upwards of 300 MMcf/d,” according to Witte. “The increased nominations were not fully due to the project in-service, as citygate demand in Wisconsin showed a notable ramp on Nov. 1 as well. However, overall flow into Wisconsin via Kewaskum and Sandwich has remained consistently higher since the project began.”
A Gas Transmission Northwest force majeure was reducing capacity through its Kingsgate location to 2,184 MMcf/d Friday after it was already scheduled to be reduced to 2,284 MMcf/d due to planned maintenance, according to Genscape analyst Dan Spangler.
“The force majeure restriction is projected to last through Nov. 13, while the planned restriction is expected to last through Nov. 21,” Spangler said. “Kingsgate’s previous 30-day average of flows into Idaho from British Columbia has been 2,135 MMcf/d.”