New lows in West Texas headlined a week of mostly moderating natural gas prices in physical markets to close out the month of November; the NGI Weekly Spot Gas National Avg. tumbled 63.0 cents to $4.410/MMBtu.

Day-ahead prices to start the week in West Texas were low enough to raise eyebrows, especially set against the general strength of the cash market early in the heating season. During the week, a glut of Permian Basin associated gas and a lack of needed takeaway capacity sent prices about as low as they can go -- negative.

With a low trade of negative 25 cents on the week, Waha skidded $1.310 to average a measly 58.0 cents. El Paso Permian dropped $1.610 to average 72.0 cents.

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More moderate forecasts helped send prices sharply lower in volatile New England during the week. Algonquin Citygate fell $5.960 to average $5.425, while Tenn Zone 6 200L dropped $6.000 to $5.515.

In the West, Northwest Sumas saw more volatility amid ongoing restrictions to southbound flows on Enbridge Inc.’s Westcoast system. Northwest Sumas spiked $5.550 to average $14.345, while in Canada, Westcoast Station 2 slid C23 cents to average C48.5 cents on the week.

The constraints driving volatility at Northwest Sumas are set to ease in the week ahead, as Enbridge announced that a recent regulatory approval will allow the operator to increase capacity at Westcoast’s Huntingdon Delivery Area by roughly 300 MMcf/d.

Natural gas futures bulls lost ground Friday as forecasters pointed to a mid-December break from cold temperatures across much of the country. After trading as low as $4.473 around lunchtime on the East Coast Friday, January Nymex futures recovered to settle 3.4 cents lower at $4.612. Week/week (w/w) January added 13.5 cents after settling at $4.477 the previous Friday.

NatGasWeather said the timing of the spike into Friday’s settle might have been caused by “too many shorts trying to exit before the weekend break,” or possibly traders willing to take on risk hoping that mild trends showing up in forecasts for mid-December Friday wouldn’t play out as expected.

“The afternoon European model was little changed” through the upcoming week, but it trended colder with a weather system across the Great Lakes and Northeast Dec. 8-11, opposite the milder trends advertised by the Global Forecast System, the forecaster said. “All weather models continued to show a mild ridge setting up across much of the eastern two thirds of the country Dec. 12-15 for lighter demand.

“...For the weekend break, if the ridge shows signs it will only last through Dec. 16-17, the markets could see that as bullish” and indicating the milder trends won’t last, the forecaster said. “But if it looks to hold through Dec. 20, the markets could see that as lasting too long.”

Meanwhile, on Thursday the Energy Information Administration (EIA) reported a 59 Bcf withdrawal from U.S. natural gas stocks that missed well to the bearish side of expectations.

The 59 Bcf withdrawal for the week ended Nov. 23 compares to a year-ago pull of 35 Bcf and a five-year average withdrawal of 49 Bcf. While larger than average for the period, the 59 Bcf pull came in well below estimates that had clustered in the upper 60s to mid 80s range, potentially signaling a greater-than-expected impact on demand from last week’s Thanksgiving holiday.

The looser-than-expected withdrawal also counters last week’s bullish 134 Bcf pull, which topped most estimates by a similarly large margin.

January natural gas futures were already trading lower Thursday morning in the lead-up to EIA’s report, giving back some of the gains posted during Wednesday’s December expiry. When the final number crossed traders’ screens at 10:30 a.m. ET, the January contract quickly dropped a little over 10.0 cents, going from $4.560 down to as low as $4.453. But by 11 a.m. ET, the front month had recovered to trade around $4.522, down a few pennies from the pre-report trading.

“This helps cancel out some of the massive draw the prior week, and we see much of this as being weekly EIA noise in a market that is seeing wild demand, weather and price gyrations,” Bespoke Weather Services said. “This far looser print can be rather easily discounted due to the Thanksgiving impact that we saw as very significant, though it still reflects that we need to keep” heating degree days “near record levels to maximize nonlinear weather demand.

“Later in winter this will become easier, and this print certainly does not erase storage concerns. However, it indicates that on average weather prices can fall back very quickly with current balances, increasing downside back towards the $4 level should we see a week or two of mild weather in mid-December, as seems fairly likely still.”

Total Lower 48 working gas in underground storage stood at 3,054 Bcf as of Nov. 23, according to EIA, down 644 Bcf (17.4%) from a year-ago and 720 Bcf (19.1%) below the five-year average.

By region, the East posted the largest withdrawal for the week at 25 Bcf, followed by a 21 Bcf pull recorded in the Midwest. The Pacific withdrew 4 Bcf, while the Mountain region withdrew 3 Bcf on the week. In the South Central, 5 Bcf was withdrawn, with a 14 Bcf pull from nonsalt offsetting an 8 Bcf injection into salt stocks, according to EIA.

“Weather-adjusted, the market was 3.5 Bcf/d oversupplied after last week’s brief stint in an undersupplied market,” analysts with Tudor, Pickering, Holt & Co. (TPH) said. “Though we believe the natural gas market will remain materially oversupplied over the short-term (and medium-term), the past few weeks have illustrated demand’s sensitivity to weather.”

The 10-14 day forecast continues to show frigid conditions for the eastern United States and the Northeast in particular, the TPH team noted.

“Having said that, supply continues to be robust, as U.S. dry production was reported as roughly 88.4 Bcf/d, or about 1.5 Bcf/d higher than two weeks ago (including the roughly 0.5 Bcf/d upward revision to production for the week of Nov. 15),” according to the TPH analysts.

Genscape Inc. analysts Margaret Jones and Eric Fell said the 59 Bcf pull indicates the market was about 4.0 Bcf/d loose versus the five-year average when compared to degree days and normal seasonality. Total power generation fell about 23 average GWh versus the previous week amid warmer temperatures and the impact from the Thanksgiving holiday.

“However, this week also saw clear evidence of coal switching in the power stack composition...despite the overall decline in loads, coal generation was actually up around 4 average GWh week/week (w/w),” Jones and Fell said. “This increase in coal generation even as loads declined meant gas generation fell even harder than what the overall drop in power loads/thermal gen would normally have implied.”

Strong physical market prices for the week helped to “push gas from around 55% of thermal generation down to about 50%,” contributing to an estimated 5.4 Bcf/d less gas burn w/w.

On the supply side, Genscape’s SpringRock daily production estimates as of Friday showed yet another daily record high, with output topping the 87 Bcf/d mark, according to senior natural gas analyst Rick Margolin.

The top-day estimate Friday was more than 1.22 Bcf/d above the prior week’s average, Margolin said.

“Texas volumes are up around 0.64 Bcf/d on a surge in intrastate interconnect receipts. Gulf of Mexico output is showing a 0.35 Bcf/d increase with resolution of an earlier-week outage in Mississippi Canyon,” he said. “Northeast production is up an estimated 0.31 Bcf/d, driven primarily by increased receipts in Northeast Pennsylvania, with Tennessee Gas Pipeline and Transco posting increases of 0.15 Bcf/d and 0.13 Bcf/d respectively.”

Estimates for Permian receipts were also higher w/w by 0.16 Bcf/d, according to Margolin.

Strength Out West, Moderation Further East

Physical prices continued to strengthen across the West Friday, especially in Southern California, while deals for weekend and Monday delivery were generally discounted across the eastern two thirds of the country; the NGI Spot Gas National Avg. increased 14.0 cents to $4.670/MMBtu.

Across the Rockies and California, where a number of locations were already trading at elevated premiums, prices continued to ratchet higher Friday. The volatile SoCal Citygate spiked $6.620 to average $13.625.

SoCal Citygate, already posting substantially higher and more volatile prices so far this winter compared to last year, is set up for even more volatility over the next week or so, according to Genscape analyst Joe Bernardi.

The Southern California trading point has experienced stronger basis and more volatility due to a combination of higher demand and “ongoing restrictions on pipeline import capacities at a time when the market has to be conservative with storage” because of regulatory limits on the Aliso Canyon facility, the analyst said. Regional demand, including Southern California Gas (SoCalGas), Kern River, El Paso Natural Gas and Mojave, averaged 3.2 Bcf/d in November, about 150 MMcf/d higher year/year.

“More gas-fired power generation has had to move to within the market due to lower power imports from the Pacific Northwest,” Bernardi said. “In addition, outright gas demand has been buoyed by population-weighted daily average temperatures coming in slightly colder than last November. Recent daily average population-weighted temperatures have dipped into the lower 60 degree range versus normal for this time of year at 69 degrees.”

SoCalGas system demand on Friday topped 2.7 Bcf/d for the first time this winter, with regional demand up near 3.6 Bcf/d, also the highest for the winter to date, according to the analyst.

“While SoCalGas system storage inventories are entering the winter in better shape than in the last two winters, restrictions continue to remain in place at the Aliso Canyon storage facility,” Bernardi said. “This will once gain place heightened dependence on import pipelines, though capacity remains restricted on several critical paths.” SoCal Citygate will likely see “heightened potential for sustained volatility given regional weather forecasts are calling for the current block of colder weather to linger” until late in the upcoming week.

Elsewhere in the West, SoCal Border Average surged $2.225 to $7.450, while Malin climbed 49.0 cents to $6.705. A number of Rockies locations recorded hefty gains as well.

“Across the Western U.S., a new storm system will arrive across the Pacific Northwest, which will bring another round of heavier precipitation to especially southwest Oregon and northern California” Friday night and Saturday, the National Weather Service said. “This will bring a new round of heavy snowfall for the Sierra Nevada and also portions of the Cascades. In fact, additional snowfall totals of one-to-two feet can be expected going through Saturday.

“By Sunday, all of this Pacific moisture and energy will traverse the Great Basin and the central and southern Rockies. The result will be locally heavy snowfall over the higher terrain. Areas likely to see the heaviest amounts will be the Wasatch of Utah and the San Juan mountains of southwest Colorado where over 1 foot of new snow is possible.”

Enbridge Inc. notified shippers Friday that it continues to advance plans to restore capacity on its Transmission South segment following the Oct. 9 rupture near Prince George, British Columbia (BC) that has disrupted flows and roiled regional markets. Enbridge said it has secured an order from the National Energy Board to increase capacity at its Huntingdon Delivery Area to around 1.4 Bcf/d. That would amount to an increase of roughly 300 MMcf/d based on previous notices to shippers estimating Huntingdon capacity.

“The capacity on the system will be gradually increased over the next few days, and there may be daily fluctuations while Enbridge does the work required to increase capacity and stabilize the system,” the operator said Friday.

Meanwhile, Westcoast flows into Alberta from BC were expected to be curtailed as part of a three-day maintenance event starting Saturday, according to Bernardi.

“A cleaning tool run is cutting delivery capacity at Gordondale to 109 MMcf/d Saturday and Sunday (Dec. 1-2), with a drop to zero on Monday (Dec. 3),” the analyst said. “An average of 144 MMcf/d has flowed here from Westcoast onto NGTL and Alliance” during the month of November.

Westcoast Station 2 jumped C50.5 cents/GJ to C99.5 cents/GJ. On the other side of the U.S./Canada border Northwest Sumas shed $7.140 to average $10.775.

Prices sold off across much of the eastern two thirds of the Lower 48 Friday with temperatures expected to moderate over the weekend. In the Northeast, Transco Zone 6 NY fell 11.0 cents to $4.355, while further upstream in Appalachia, Dominion South eased 4.0 cents to $4.160.

A mild break was expected to dominate the southern and eastern United States over the weekend, bringing above normal temperatures including highs in the mid 40s to 60s in the Northeast and in the 70s to lower 80s across Texas and the South, NatGasWeather said Friday.

“However, at the same time a strong weather system will spin up over the central U.S. with increasing rain and snow, while also drawing in cold Canadian air,” the forecaster said. This sets up the week ahead to be “quite cold over much of the country as below normal temperatures spread across most regions.”