Natural gas futures resumed their sideways action in a quiet session Friday, with prices fluctuating within a tight band of less than a nickel throughout the day. The Nymex May gas futures contract eventually settled just 0.4 cents lower at $2.660/MMBtu, as did June, which slipped to $2.704.
Cash prices were more convincingly lower despite a cool shot that was forecast to sweep across the northern and central United States through the early part of the week, sending overnight lows down into the 20s and 30s. Most regions saw losses capped at around a dime, but markets out West plunged more than 50 cents in some areas. The NGI Spot Gas National Avg. fell 10 cents to $2.265.
As the current cold blast sweeping across the northern and central United States did little to prop up spot gas prices, the potential for upcoming weather systems continued to have very little sway with traders. The prompt month settled within a penny on three days between Monday (April 8) and Friday.
As for the Friday weather models, the Global Forecast System offered no surprises with minor swings in demand through the end of the month as weather systems with weak cooling were forecast to sweep across the northern and central United States, but with warm breaks in between, according to NatGasWeather. Even the cool shot expected to start the week is not as impressive as it was in earlier weather data, resulting in only near-normal national demand instead of stronger than normal.
Teleconnection wise, blocking continued to generally be over-forecast by models, now looking to be virtually a nonfactor into the final third of April, though enough western U.S. ridge remained to support the continued flow of cooler air into the Midcontinent in the medium range, according to Bespoke Weather Services. “It is quite difficult for colder weather to have as much impact once to late April, however, unless we see an extreme event, which at this time is looking quite unlikely.”
The lack of significant heating demand and the absence of any real cooling demand are likely to result in a significant improvement in the storage picture. Tudor, Pickering, Holt & Co. Inc. on Friday reiterated its view that the Energy Information Administration’s (EIA) next storage report could show a 100 Bcf-plus build, which is roughly five times the seasonal norm and would come despite dry gas production being down around 1 Bcf/d since the end of March.
Although the EBW Analytics Group projection is about 20 Bcf shy of the triple-digit mark, it sees significant loosening in storage balances in the next EIA report and the two after that. “In 30-45 days, the market may sit at a modest year/year storage surplus, albeit with a 250 Bcf deficit to five-year average storage levels,” EBW CEO Andy Weissman said.
For all the bearishness in the market at the moment, a couple of factors have managed to maintain a firm floor for natural gas at $2.65, according to Bespoke. That’s likely because of an increase in liquefied natural gas exports, which remained well off highs but had made notable gains over the past few days as of Friday thanks to Cheniere Energy Inc.’s Sabine Pass facility ramping back up following planned maintenance. Production also remained lower because of some ongoing springtime maintenance.
“While these indicators are a little more bullish day/day, we need to see the actual balance data improve before increasing confidence that we can stage a meaningful rally, but if the burns can retighten, the market may be ready to make a run toward the $2.75 level in the May contract,” Bespoke chief meteorologist Brian Lovern said.
Led by steep declines in the West, spot gas prices slid into the weekend despite an expected cold snap that was set to linger through early in the week. Part of the massive storm that affected the country’s midsection last week was forecast to progress eastward across the region, according to AccuWeather.
The storm slated to close out the weekend in the Northeast was expected to bring severe thunderstorms and tornadoes to the South. In the Northeast, however, the forecaster was expecting the storm to mostly produce drenching rain.
“Monday is likely to be rainy and mild across much of the region. A few heavier thunderstorms may join in over the central Appalachians and mid-Atlantic coast. However, in part of eastern New England, an easterly wind may hang on and create raw conditions along the coast,” AccuWeather senior meteorologist Alex Sosnowski said.
It was possible that enough rain would fall on part of northern New England, where there was still a substantial amount of snow on the ground that could cause urban and small-stream flooding through early Tuesday. Dry weather was forecast to return to the mid-Atlantic and southern New England on Tuesday, AccuWeather said.
Meanwhile, after a prolonged soggy, chilly winter, the West is enjoying a return to the mild conditions for which the region is known. The lack of demand sent prices in California tumbling as much as $1 lower at Southern Border/PG&E, where prices averaged $1.09. Malin dropped 14 cents to $2.24.
Over in the Rockies, Transwestern San Juan plunged 54 cents to $1.30, although most other pricing hubs slipped 20 cents or less.
The regional weakness comes as Rockies Express Pipeline (REX) is scheduled to begin planned pipeline work Tuesday that could limit up to 1.59 Bcf/d of total gas in northern Colorado consisting mostly of eastbound flows, but also a small amount of deliveries and receipts on gas days Tuesday through Thursday. The work is expected to limit flows through Segment 200 to zero, as well as shut in a short list of various delivery and receipt points in Segment 160.
Flows through Segment 200 have averaged 0.95 Bcf/d and maxed at 1.42 Bcf/d during the past 30 days, according to Genscape Inc. The affected delivery points averaged 23 MMcf/d and maxed at 141 MMcf/d, and the affected receipt points averaged 10 MMcf/d and maxed at 141 MMcf/d in the past 30 days.
“Therefore, we expect to see on average a total impact of 0.98 Bcf/d but up to a maximum of 1.59 Bcf/d,” the firm said.
Light demand in the West likely served to further weaken already weak prices in the Permian Basin Friday, as regional locations posted declines of as much as 18.5 cents at El Paso Permian, which averaged just 35.5 cents.
El Paso Natural Gas (EPNG) is set to replace a section of the 1103 line downstream of the Guadalupe compressor station, work that is expected to last through Thursday (April 18). EPNG could put pressure on Permian exports if the maintenance-restricted operating capacity of 725 MMcf/d is met by future nominations, according to Genscape.
The 428 MMcf/d reduction falls short of constraining the month-to-date average of 733 MMcf/d. However, the month’s maximum of 838 MMcf/d would equate to 150 MMcf/d of Permian outflow getting backed up, the firm said. “Though EPNG has stated it does not anticipate any impacts to shippers, an uptick in flow during the next week could continue to help keep Waha prices depressed,” Genscape analyst Matthew McDowell said.
A slew of other pipeline maintenance events similarly had little effect on spot gas prices. Prices across Appalachia slid about 5 cents on average even though Texas Eastern Transmission (Tetco) is scheduled to begin additional maintenance on Monday that could bring volatility to the M2 and M3 zones.
Tetco plans to conduct an outage at its Waynesburg, PA, compressor station that is scheduled to last until April 29. In its latest maintenance calendar, the pipeline indicated that depending on nominations, restrictions to interruptible and secondary services may be required, and that receipts on the Waynesburg interconnect with Columbia Gas Transmission (TCO) and the Crayne interconnect with Equitrans Pipeline could experience higher-than-normal pressures. However, TCO also included this event on their maintenance calendar, and according to its operators, the pipeline will not be able to take any receipts at the interconnect.
“Tetco has received a consistent 189 MMcf/d from TCO at Waynesburg month-to-date, and it has delivered an average of 64 MMcf/d to Equitrans at Crayne over the same time period, both of which could be shut in for the duration of the event if TCO’s worst-case scenario interpretation is correct,” Genscape analyst Josh Garcia said.
However, Tetco has 78 MMcf/d of firm capacity at Waynesburg, meaning 111 MMcf/d of receipts are at risk, assuming all firm capacity is utilized and only nonfirm nominations are affected. Tetco also has 98 MMcf/d of firm capacity at Crayne, which is more than any single day’s nominations at that meter month-to-date, according to Genscape.
“Additionally, the only impact might truly be higher pressures. Tetco has a variety of additional interconnects for reroutes with both TCO and Equitrans, so this event should not impact the system as a whole,” Garcia said.
Farther downstream in the Northeast, Tennessee Gas Pipeline (TGP) from Monday (April 15) through April 23 is scheduled to perform maintenance at Compressor Station 245 in Herkimer County, NY. Operational capacity at the station would be reduced to 777 MMcf/d for the duration of the event.
Flows through the station toward New England had averaged 799 MMcf/d over the 14 days leading up to Friday, reaching highs of 965 MMcf/d within that period, according to Genscape. Flows will be reduced by 188 MMcf/d compared to the 14-day max.
“Northeast temperatures are warming but remain in heating degree day territory, with forecasts constantly being revised,” Genscape analyst Dominic Eggerman said.
Additionally, TGP plans to perform pigging runs close to the MLV 843 throughput meter further upstream in northern Louisiana. Operational capacity would be reduced to 422 MMcf/d from April 15-24, which would limit about 260 MMcf/d based on 14-day max nomination. “TGP has a variety of reroute options at this part of the system,” Eggerman said.