- Nymex futures gain additional ground despite warmer changes to weather outlooks
- Cash prices rally as demand flips to cooling mode in key demand regions; Permian prices back in positive territory
- Tetco set to shut gas flows for pipe replacements through May 10, including at Cenagas Mexico interconnect
Natural gas futures continued to gain ground Monday despite warmer changes to weather outlooks. Strong cash prices at the end of last week that further strengthened at key pricing locations for the start of this week lent support to the futures strip, with the Nymex May contract settling 4.4 cents higher at $2.708/MMBtu and June rising 4.2 cents to $2.748.
Substantial gains were seen in cash markets in Appalachia and the Northeast, and $1-plus increases out in West Texas sent regional prices there back to the positive side of the ledger after roughly two weeks in negative territory. The NGI Spot Gas National Avg. rose 9.5 cents to $2.385.
The widespread increases came as mild to warm conditions were forecast to cover most of the United States early this week with highs of 50s and 60s across the northern part of the country, and locally 70s across the South Great Lakes/Ohio Valley, according to NatGasWeather. The southern United States was expected to see highs in the 70s and 80s, while showers were forecast to sweep across the Northwest, South, Great Lakes and Northeast, just without cool air besides the far North.
Cooler conditions were forecast to spread across the northern and central United States Wednesday through Sunday, with lows forecast to drop into the 20s and 30s, the firm said.
Meanwhile, weekend weather models made a rather notable jump warmer due to a couple of different reasons, according to Bespoke Weather Services. One is an increase in the amount of Pacific flow coming in, largely related to the background El Nino-Southern Oscillation state. The other is a notable weaker trend in the projected blocking in the current six- to 10-day period, pushing that portion of the forecast several gas-weighted degree days warmer than it appeared on Friday.
“Models do show the blocking coming back in today’s 11-15 day, but confidence is reduced somewhat, given the six- to 10-day trends today. Regardless, the pattern will struggle to deliver any notable cold, remaining significantly different compared to the pattern from one year ago,” Bespoke chief meteorologist Jacob Meisel said.
As forecasts reach the end of April, the market’s focus will shift to looking for the first signs of significant cooling demand across the southern United States, Bespoke said, though it noted it was not yet seeing anything on this front as of Monday.
Weather model runs, which have been struggling with the complex blocking pattern in the West, could continue to be erratic early this week, according to EBW Analytics Group. Remaining cold air in Canada, however, is limited.
“Absent another major model guidance shift early this week, the May contract is likely to trade in a narrow range before it begins to falter again,” EBW CEO Andy Weissman said.
The latest midday American model data trended back a little colder with a weather system and associated cold shot sweeping across the country this weekend, while also stalling it a day longer through early next week, according to NatGasWeather. However, the data was further warmer trending with a break between cool shots across the northern United States April 16-20.
“We then see the pattern remaining relatively active through late April with bouts of cooler-than-normal conditions across the western, central and northern United States as weather systems track through, but also with nice warm breaks in between that will effectively offset,” NatGasWeather said.
Cash Up as Temps Rise
Spot gas prices were mostly higher Monday as thermostats in some parts of the country flipped from heating to air-conditioning mode. With temperatures in Texas climbing into the 80s, cash made significant advancements considering the time of year.
Most notable were Permian Basin prices, which shot up more than $1 at a couple of pricing hubs to move cash back above zero. Waha rose $1.11 to average 34 cents, after plunging as low as minus $9 last week.
Elsewhere in the Lone Star State, Texas Eastern S. Texas rose 10.5 cents to $2.665 as Texas Eastern Transmission (Tetco) was set to conduct pipe replacements on its 30-inch diameter Line 16 between the Santa Fe, TX, compressor station to the end of the line at the Cenagas Mexico interconnect from April 10 to May 18. Several locations were to be shut in for the duration of the outage, most notably the Cenagas Mexico interconnect and the Magic Valley Calpine power plant.
Together, demand from these two locations has trended upward over the last two weeks, aggregating as much as 116 MMcf/d, according to Genscape. “Tetco had only resumed exports to Mexico on March 26 after flowing minimally since the beginning of February,” Genscape natural gas analyst Josh Garcia said.
Tetco was also scheduled to conduct an outage on its 30-inch diameter Lines 16 and 18 at the Gillis, LA, compressor station from April 9 to 14. Capacity through Gillis will be reduced to a net zero flow for the duration of the event, putting bullish pressure on Texas Eastern W. LA cash prices, according to Genscape. Gillis has averaged 201 MMcf/d and maxed at 261 MMcf/d in westbound flows over the last 14 days.
“Locations downstream of the Gillis CS have various sources of alternate supply from East Texas and West Louisiana. Most importantly, this event should not prevent deliveries from Tetco to Sabine Pass LNG via Creole Trail Pipeline,” Garcia said.
Texas Eastern W. LA next-day gas picked up a nickel to $2.59, more than double the increase seen at other points along the pipeline in Louisiana.
A slew of pipeline maintenance events are customary during the spring shoulder season, and this week is no different. Beginning Tuesday and occurring three additional times in the next two weeks, Natural Gas Pipeline Company of America (NGPL) will reduce capacity along its Amarillo mainline to 38% of its scheduled firm capacity for in-line inspection tool runs.
Based on flow data for the “North of Sta 106 Gage” flow point, this means a reduction of more than 570 MMcf/d versus the rolling 30-day average, according to Genscape. Between tool runs, operational capacity should return to normal. The tool runs are scheduled for April 9, 11, 16 and 23.
Gains were even more stout in the Northeast, where daytime highs in Washington, D.C., soared into the 80s on Monday. Algonquin Citygate spot gas surged 35 cents to $2.885, while other regional pricing hubs posted similarly hefty increases.
Prices out West, meanwhile, were largely a sea of red as light demand was seen ahead of the series of storms forecast for this weekend. Malin spot gas plunged 17 cents to $2.29, while Kingsgate dropped 24 cents to $2.195.