- May Nymex futures contract down 0.9 cents to $2.699; June down 0.9 cents to $2.739
- “Recent weather data has been inconsistent, flip-flopping between milder and cooler trends for the second half of April,” NatGasWeather says
- “As expected, flush production following freeze-offs and maintenance at Sabine Pass Train 1 and Train 2 are setting the market up for lackluster cash pricing”: Energy Aspects
- “Permian production so far in April has dropped off considerably compared to the last several weeks of March,” says Genscape’s Bernardi
Mixed forecast trends and ongoing concerns over loose shoulder season balances left natural gas futures stuck in neutral Tuesday. In the spot market, late-season wintry conditions inspired modest gains in the Rockies and Northeast, while West Texas returned to negative territory; the NGI Spot Gas National Avg. slid 1.5 cents to $2.37/MMBtu.
Following Monday’s 4.4-cent rally, the May Nymex futures contract eased 0.9 cents to settle at $2.699, trading within a tight range from $2.680 to $2.725. June also gave back 0.9 cents, settling at $2.739. Further along the strip, July settled at $2.798, off 0.8 cents.
The midday Global Forecast System (GFS) came in somewhat cooler in its outlook for the back half of April, a reversal from overnight trends heading into Tuesday’s trading, according to NatGasWeather.
“Recent weather data has been inconsistent, flip-flopping between milder and cooler trends for the second half of April,” the forecaster said. “After milder trends in the GFS model overnight, the GFS is back a little cooler this round.
“Overall, no major changes, with bouts of cooler-than-normal conditions across the western, central and northern United States through the end of the month as weather systems track across the country with heavy precipitation, but also with nice warm breaks in between. Where the data is struggling is just how cool weather systems will be April 20-25.”
Still, despite an “active pattern with periods of below-normal temperatures,” expectations are for upcoming weekly Energy Information Administration (EIA) storage reports to show larger-than-normal injections, shrinking inventory deficits, NatGasWeather said.
Energy Aspects issued a preliminary estimate for a 33 Bcf injection for Thursday’s EIA report, which covers the week ended April 5.
“Shoulder season is firmly underway,” the firm told clients in a recent note. “As expected, flush production following freeze-offs and maintenance at Sabine Pass Train 1 and Train 2 are setting the market up for lackluster cash pricing.”
The firm’s balances as of late last week showed production in line with peak weekly supply volumes observed in late December, and this comes as “Appalachia still has not recovered to its pre-freeze-off baseline.” Based on recent production growth, Energy Aspects viewed the market as “looser year/year by a whopping 7.5 Bcf/d” for last week.
“However, this looseness reduces to just 2.5 Bcf/d year/year if adjustments are made for the Sabine outage and assume similar weather year/year,” according to the firm. “Moving forward, the major question for the balances is whether the looseness can be reduced by new demand projects or exacerbated by further production growth. At least in the shoulder season, unless demand spikes on warmer-than-normal weather, balances are looking loose.”
Natural gas bulls fretful over loose balances could soon be getting some good news on the liquefied natural gas (LNG) export front.
Genscape Inc. cameras have detected activity suggesting Cheniere Energy Inc.’s Sabine Pass Trains 1 and 2 could be returned to service within the next few days, the firm told clients Tuesday.
On Monday, “Genscape infrared monitors observed activity at the flaring equipment for Trains 1 and 2,” analyst Allison Hurley said. “This flare has been off since March 22 when Trains 1 and 2 were fully shut down.” Later on Monday, “our cameras detected other signs of activity that are believed to be precursors for startup. Our LNG team believes these indicate full restoration within a matter of days.”
April Snow, But Cash Quiet
The natural gas markets may have shifted into injection mode, but don’t tell that to Old Man Winter, who’s set to reload and drop a major storm into the Rockies and central United States this week, according to forecasters.
“A major late-season winter storm will develop over parts of the Northern Rockies and move eastward to the Central Plains/Upper Mississippi Valley by Wednesday and Thursday,” the National Weather Service (NWS) said. “Heavy snow and strong winds will produce life-threatening travel conditions in parts of the Plains and Upper Midwest.
“...On Wednesday, snow will become heavy over parts of the Northern/Central Plains. Expect blizzard conditions as northeast winds intensify. Rain will also stretch from parts of the Central Plains eastward into the middle Mississippi Valley and western Ohio Valley. Heavy snow will also expand over the upper Mississippi Valley into parts of the upper Great Lakes overnight Wednesday into Thursday.”
On Tuesday, Radiant Solutions was showing temperatures flipping to below-normal levels over the next few days for some population centers in the Rockies and Midwest, although with absolute lows not particularly extreme given the time of year.
Radiant’s forecast showed temperatures in Denver shifting from 17 degrees above normal Tuesday to close to 17 degrees below normal by Thursday. Lows in the Mile High City Thursday could drop into the low 20s, according to the forecaster.
Minneapolis was expected to see temperatures go from slightly warmer-than-normal Tuesday to around 10-15 degrees below normal starting Wednesday and continuing into the weekend, including lows in the upper 20s to low 30s.
Reaction to the late-season wintry conditions was limited in Tuesday’s spot market. A number of Rockies locations posted modest gains but traded well shy of Henry Hub. Cheyenne Hub gained 24.5 cents to $2.260.
Meanwhile, the West Texas cash market’s time above water lasted just one trading day, as most of the region plunged back into the negatives Tuesday. Waha sank 59.0 cents to average negative 25.0 cents.
Over the last two weeks or so, West Texas “sellers” have been routinely paying to get their gas out of the constrained Permian Basin. The most severe payouts to date occurred last week, when NGI recorded deals as low as negative $9.000.
In Monday’s day-ahead trading, NGI did not record a single West Texas transaction priced in the negatives. That hadn’t happened since the March 15 trade date, when the lowest price recorded in the region came in at $1.40, Daily GPI historical data show.
Associated gas production trends in the Permian may shed light on the brief reprieve from negative pricing.
“Permian production so far in April has dropped off considerably compared to the last several weeks of March,” Genscape analyst Joe Bernardi said. “Over the last week, production has averaged just under 9.8 Bcf/d; the last time weekly average production was below this mark was immediately before Permian cash prices started averaging below zero. For comparison, production did not fall below 10.0 Bcf/d from March 19-31, but the only day in April to exceed 10.0 Bcf/d was April 1.”
Planned maintenance on El Paso Natural Gas (EPNG) was expected to limit throughput capacity on the South Mainline for Wednesday, potentially impacting Permian outflows, according to Bernardi.
“The ‘CASA C’ meter on EPNG’s intermediate pressure system in Arizona will be limited to around 440 MMcf/d, a reduction of 130 MMcf/d from its normal operating capacity,” Bernardi said. “It typically flows close to full. This meter saw flows decrease for several days at the beginning of last month (before the Permian’s record high production and record low spot cash pricing) due to other planned maintenance, which did not lead to notable re-routes or major prices responses.
“Some larger reductions at this meter in the past several years have led to local flow changes, however,” the analyst said. “EPNG has shown the ability to reroute about 150 MMcf/d from its intermediate to its low pressure system here, mitigating larger drops in overall throughput.”
In the Northeast, New England locations posted substantial gains as the NWS was calling for snow in the region Wednesday.
The NWS pointed to a “complicated area of low pressure over the lower Great Lakes” that was expected to move off the Northeast coast overnight Tuesday. “The storm will produce snow over northern New England through Wednesday evening.”
Further upstream in Appalachia, prices were steady. Texas Eastern M-2, 30 Receipt notched 2.0 cents to average $2.440.
An unplanned outage Monday could impact 105 MMcf/d of north to south capacity on Texas Eastern Transmission’s (Tetco) 30-inch diameter line from Berne to Tompkinsville until further notice, Genscape analyst Josh Garcia said.
“Berne had just been brought back into service last week after spending several months below capacity due to the explosion between Athens and Berne,” Garcia said. “Flows through Berne have averaged 1.79 Bcf/d and maxed at 2.04 Bcf/d since the force majeure was lifted, but now capacity through Berne is 99% utilized. There is no estimate for a return to service, but with the exception of the Berne explosion, Tetco has resolved these unplanned outages relatively quickly this winter.”
Meanwhile, shoulder season maintenance work continues this week on various pipeline systems.
Midcontinent Express Pipeline is set to begin multiple maintenance events starting Wednesday that could affect supply going into the Transcontinental (aka Transco) and Destin pipelines, according to Genscape.
For Wednesday, “Midcontinent Express will shut in receipts from its interconnect with Enable Gas Transmission (EGT) in Richland County, LA,” Garcia and analyst Dominic Eggerman said. “EGT has delivered an average of 227 MMcf/d to Midcontinent Express through this interconnect over the past 30 days. This is offloaded to downstream interconnects, most notably Transco and Destin. The Destin interconnect in Clarke County, MS, will also be unavailable for transport services on Thursday and Friday (April 11 and 12). Over the last 30 days, Midcontinent Express has delivered an average of 125 MMcf/d to Destin through this meter.”
These maintenance events could constrain supply bound for the Southeast, a region already impacted by maintenance-related reroutes, according to the analysts.
“Transco Zone 4 has lost about 580 MMcf/d of supply from Gulf South due to the Scott Mountain interconnect maintenance set to last another 11 days,” Eggerman and Garcia said. “Additionally, Gulfstream has lost around 700 MMcf/d of receipts from two Southeast Supply Header (SESH) maintenance events set to end” Tuesday and Wednesday.
These supply disruptions have come as shoulder season weather has put downward pressure on Transco Zone 4 and Florida Gas Zone 3 prices, and Southeast and Mid-Atlantic temperatures are expected to grow milder this week, according to the analysts.
Elsewhere, maintenance on the Mojave Pipeline could restrict around 0.1 Bcf/d flowing into California from Arizona, according to Genscape analyst Matthew McDowell.
Starting Tuesday and continuing through Thursday (April 11), “Mojave will be conducting maintenance at its Topock Compressor Station and limiting throughput to 337 MMcf/d -- 100 MMcf/d below month-to-date averages,” McDowell said. “The three-day maintenance event could be preventative efforts to shore up a compressor station that has experienced six forces majeure within the last year.”