An intense blast of polar cold to close out January continued to support natural gas futures gains Friday, while forecasters looked ahead to a pattern that could see more frigid temperatures spill into the Lower 48 next month. In the spot market, chilly conditions expected over the weekend for the Midwest failed to pique much buyer interest in three-day deals, while East Coast points gave back some of their recent gains; the NGI Spot Gas National Avg. fell 26.5 cents to $3.315/MMBtu.
February Nymex futures settled 7.9 cents higher at $3.178, gaining for a second straight session to help recover some of the losses from a 44.2 cent sell-off to start the holiday-shortened trading week. The front month on Friday traded as high as $3.207 and as low as $3.047. Further along the strip, March settled 7.4 cents higher at $3.072, while April settled at $2.884, up 4.0 cents.
With balances loosening “dramatically” and indications the intense cold pattern moving in late this month could break by early February, “many traders opted to sell now and ask questions later,” Bespoke Weather Services said. “However, through the week it became clear that the cold shot to close out January and bring in February was the real deal, and also that cold risks can easily return into the middle of February” as a negative Eastern Pacific Oscillation pattern returns upstream.
“This is a big part of the reason we still see natural gas risk skewed higher into next week; while the market can handle what should be a very significant cold shot next week thanks to warmth at the end of December providing a salt storage buffer, with another significant cold shot the situation would begin to get more dicey with storage levels overall still sitting decently below average,” Bespoke said.
The Energy Information Administration (EIA) on Thursday reported a 163 Bcf withdrawal from natural gas stocks for the week ended Jan. 18, on the bullish side of major surveys but smaller than the five-year average 185 Bcf pull and the 273 Bcf withdrawal EIA recorded in the year-ago period.
Total Lower 48 working gas in underground storage stood at 2,370 Bcf as of Jan. 18, 305 Bcf (11.4%) below the five-year average but 33 Bcf (1.4%) higher than last year’s stocks, according to EIA.
“Though fleeting, 2019 inventories are now above 2018,” Tudor, Pickering, Holt & Co. (TPH) noted Friday. “Inventories remain at an 11.4% deficit to the five-year norm, but are also at a 1.4% premium to 2018 and the five-year minimum.
“Weather adjusted, the market is 1.0 Bcf/d oversupplied (versus 2 Bcf/d oversupplied three weeks ago),” analysts noted. “Leading edge flows suggest that U.S. dry natural gas production is down 1.2 Bcf/d following frigid weather and several infrastructure-related events in the Northeast. All-in, Northeast production is down 1 Bcf/d week/week.”
Although Northeast gas production is recovering “through alternative forms of egress, production likely remains depressed as the polar vortex could lead to freeze-offs in the Midwest and Rockies,” TPH analysts said. “Thus, to end January, cold weather likely leads to the inventory deficit deepening and the weather-adjusted balance moving to an undersupply (at least temporarily).”
The current polar vortex cold weather pattern puts deliverability issues “very much back in play,” Genscape Inc. analyst Eric Fell said during a discussion Thursday on energy-focused chat platform Enelyst.
“Given the current weather forecast that is calling for a major cold shot between now and the end of January, it seems likely that we will see some short-term deliverability issues (physical cash market fireworks), given very high demand, storage balances that are well below normal and significant production freeze-offs,” Fell said.
Genscape production estimates already are dropping, with cold weather and operational issues both playing a part, according to the analyst.
“We’re seeing quite a few outages over the last several weeks, with freeze-offs being some of it and field outages being part of it as well,” Fell said. “In the Northeast, we currently see about 2.9 Bcf/d offline (1.4 Bcf/d due to the Tetco explosion). Most of the outages we’ve seen do not have a timeframe associated with them and could be more prolonged due to wintry conditions.”
Falling Prices In Midwest, East
Despite bitterly cold temperatures in the weekend forecast, price adjustments across the Midwest were pretty tame Friday. Chicago Citygate fell 1.5 cents to $3.135, while Emerson picked up 4.0 cents to $3.140.
Radiant Solutions was calling for well below normal temperatures in Minneapolis and Chicago Friday to continue through the weekend and into next week, including lows in the negative single digits. Things were only expected to get colder from there for chilly Midwesterners, with temperatures dropping to dangerously low levels by Tuesday and Wednesday, into the negative teens and 20s.
Radiant was calling for near-normal to above-normal temperatures along the Interstate 95 corridor by Sunday before more intimidating cold expected to move in by the middle of the upcoming week.
The forecaster was calling for lows by Sunday in the upper 20s in New York City and Philadelphia, with highs reaching into the 40s. Temperatures along the populated East Coast were expected to drop off during the week ahead, averaging around 15-20 degrees below normal from Boston down to Atlanta by Thursday, according to Radiant.
Further upstream in Appalachia, Texas Eastern M-2, 30 Receipt shed 9.5 cents to $2.730.
Enbridge Inc. was continuing to work Friday on a plan with federal and state regulators to restore some service as early as Monday on a segment of the Texas Eastern Transmission (Tetco) system in southeast Ohio that exploded on Jan. 21.
Tetco said on its bulletin board that while a variety of factors could potentially change the schedule, crews were aiming to restore as much as 1 Bcf/d of north to south capacity through the system’s Berne compressor station between Monday and Wednesday (Jan. 28-30).
The blast, which Enbridge said injured two residents and damaged three nearby homes, has cut flows on the system by about 1.4 Bcf/d and by 2.2 Bcf/d compared to the 30-day maximum, according to Genscape.
Tetco restricted north to south capacity through the Berne compressor to zero a day after the incident. Genscape analysts said Friday “we have seen reported flow revisions indicating 130 MMcf/d of southbound flows” through the Berne compressor on the 30-inch diameter line Jan. 23 “despite the notice indicating net zero flows, and a northbound flow reversal” as of Friday’s early cycles, “which could be revised.”
Elsewhere, prices sold off heavily across West Texas Friday after strengthening earlier in the week. Waha tumbled 37.5 cents to $2.300.
El Paso Natural Gas (EPNG) on Friday lifted a strained operating condition notice it issued earlier in the week from supply underperformance in the Permian Basin associated with cold overnight temperatures.
Meanwhile, a three-day maintenance event starting over the weekend was expected to cut about 130 MMcf/d of northwest flows out of the Permian on EPNG, according to Genscape analyst Joe Bernardi.
“EPNG will perform a maintenance pigging operation from Caprock to Roswell, scheduled to begin on Saturday (Jan. 26) and last through Monday (Jan. 28),” Bernardi said.
The work was expected to limit operational capacity through the “LINCOLN N” meter in north central New Mexico to 246 MMcf/d, 127 MMcf/d below the prior 30-day average, according to Bernardi.
“This meter is not a primary exit point for EPNG’s Permian outflows, but is the next flow point downstream of EPNG’s Permian northbound outflow point,” the analyst said.