- It’s another nickel gain for May Nymex gas; contract rolls off the board at $2.566
- Back-to-back weather systems seen driving up demand in northern United States, while heat builds in southern part of the country
- Production growth seen outweighing demand increases expected this summer
- Cash firms ahead of cold snap, while pipeline maintenance continues
After a brief dip into the red, the May Nymex gas futures contract rolled off the board 5.2 cents higher at $2.566/MMBtu Friday as weather models intensified an expected cold snap in the northern United States while also increasing heat for the southern states. June, which takes over the prompt-month position on Monday, settled at $2.58, up 3.2 cents.
Spot gas prices also climbed at the majority of pricing hubs Friday as back-to-back weather systems and a reinforcing cold shot were forecast to hit the central and northern United States beginning over the weekend and lasting through the early part of the week, dropping overnight temperatures into the 20s to 40s. With steep declines on the West Coast, however, the NGI Spot Gas National Avg. fell 2.5 cents to $2.055.
During what can be a finicky season weather-wise, recent forecasts have rejuvenated natural gas markets that only days ago had reached lows not seen in years. Demand additions, in the form of both heating degree days (HDD) and cooling degree days (CDD), had been showing up in weather models since earlier in the week, although it wasn’t until Thursday when traders finally seemed to take notice.
Weather data overnight Thursday reflected another small upward revision, showing slightly higher HDD levels in the upcoming week from the colder push into the northern United States associated with the blocking developing in the higher latitudes, according to Bespoke Weather Services. The firm also noted a late-season snowstorm due to hit the Upper Midwest over Saturday and Sunday. In terms of cooling demand, the next few days were expected to feature some noteworthy heat in parts of the South, with numerous highs set to reach the 88- to 92-degree level in the Southeast.
“Highs reaching that level would be close to records for this time of the year in many locations,” Bespoke chief meteorologist Brian Lovern said. “All of this keeps total forecast gas-weighted degree days over the next couple of weeks above normal, mostly due to the higher demand in the upcoming week, as week two looks closer to normal but still above the demand levels seen on the same dates one year ago.”
While Friday’s demand additions were not significant, after already having added more than 30 Bcf since last Monday, traders took notice. Nevertheless, the coming pattern is still considered relatively bearish because of larger-than-normal storage builds continuing for several more weeks to come, according to NatGasWeather. “It’s just the set up isn’t quite as extreme with the bearishness compared to what the data once showed.”
The Energy Information Administration (EIA) reported a 92 Bcf injection for the week ending April 19 that lifted inventores to a 55 Bcf surplus to year-ago levels. At 1,339 Bcf, total stocks are still 369 Bcf (22%) below the five-year average, according to EIA.
On a weather-adjusted basis, the market continues to be around 5 Bcf/d oversupplied, according to Tudor, Pickering, Holt & Co. (TPH). The firm noted, however, that about half of this is attributable to maintenance on liquefied natural gas (LNG) projects and Mexican export pipes. Mild weather across much of the Lower 48, in which HDDs were about 5% below the five-year average, also contributed to the hefty build, TPH said.
This week's print looks to be shaping up much the same, with flow data showing demand down 5 Bcf/d week/week and being driven primarily by a 3.8 Bcf/d drop in residential/commercial demand, according to the firm.
“Supply is down roughly 1 Bcf/d week/week, partially offsetting the demand drop, but the net 4 Bcf/d loosening implies a build of around 120 Bcf versus norms of 73 Bcf, which would further erode the deficit to just 18%,” TPH analysts said.
Cold Snap Lifts Cash
Spot gas prices across much of the United States strengthened Friday as cooler weather was set to arrive in the East beginning over the weekend and lasting through the early part of the week.
The fresh chill was expected to arrive behind a storm responsible for soaking the region with rain and locally severe thunderstorms into Friday night, according to AccuWeather. Just enough cold air may catch up with moisture to produce some wet snow or a rain and wet snow mix across portions of northern Pennsylvania and central and northern New York state for a time Saturday morning and midday.
“Rain will linger across northern New England to start the weekend as strong winds whip and temperatures tumble in the balance of the Northeast,” AccuWeather meteorologist Renee Duff said.
Despite strong winds whipping, conditions will not be that harsh for late April across the lower mid-Atlantic, according to the forecaster. The fresh chill over interior areas was expected to lay the groundwork for wintry weather to arrive as a new storm was set to arrive into Sunday.
“This is the same storm that will first lay a swath of snow from the northern Plains to the Great Lakes early in the weekend,” Duff said.
While temperatures associated with this first storm were expected to bottom out on Sunday, the northeastern states were due for more storms through midweek, although most precipitation with these events is likely to fall in the form of rain, according to AccuWeather.
The line of weather systems on tap for the Northeast sent spot gas prices up by the double digits at several pricing hubs, although Transco Zone 6 NY managed to slip 2.5 cents to $2.28.
Most Appalachia markets posted mostly small increases of less than a dime, although both Millennium East Pool and Tennessee Zone 4 Marcellus jumped significantly more as prices recouped the previous day’s steep losses.
Pipeline work in Appalachia is set to continue. Nexus Gas Transmission was scheduled to begin conducting in-line inspection tool runs in eastern Ohio on Monday. Although the event is not expected to create any flow disruptions, Nexus did warn of the possibility.
The tool run is taking place in Market Zone 1, from Hanoverton Station to Wadsworth Station. Nexus indicated that if isolation of this section of pipe is necessary, the worst-case scenario would be to cut all deliveries onto Nexus from Texas Eastern Transmission (Tetco), leading to an impact of up to 366 MMcf/d.
“However, this worst-case scenario seems unlikely based upon the wording of the notice provided by Nexus,” Genscape Inc. natural gas analyst Anthony Ferrara said. “Enbridge Inc., the pipeline operator of both Nexus and Tetco, has a reputation of usually providing more notice if an event will be more impactful than initially expected.” No end date has been provided for the event.
In addition to the Nexus maintenance, Columbia Gas Transmission (TCO) was scheduled to perform compressor work on the Lost River compressor station in northern Virginia beginning Monday through May 9, which could limit up to 207 MMcf/d of deliveries. During the maintenance, there is a high potential impact to firm and non-firm services at the Warren County location (meter 842564).
“Over the past 30 days, deliveries to Warren County have averaged 154 MMcf/d and maxed at 207 MMcf/d,” Ferrara said. However, over the five days leading up to Friday, deliveries had only averaged 13 MMcf/d and maxed at 38 MMcf/d.
Further east, gains of 5-10 cents were common throughout the Southeast and Louisiana, while cash prices in the Midwest were stronger amid the snowstorm forecast to hit the region over the weekend. Chicago Citygate jumped 13.5 cents to $2.345.
Meanwhile, planned maintenance on ANR Pipeline’s Michigan Leg South could create constrained conditions and possibly flow cuts. From gas days April 29-May 4, ANR plans to reduce capacity at the St. John Compressor Station in the Northern Area (Zone 7) by 500 MMcf/d, leaving 767 MMcf/d available.
Over the past 30 days, flows through St. John Eastbound have averaged 602 MMcf/d, including a single-day high of 1,154 MMcf/d, according to Genscape. The pipe work, therefore, raises the potential for “some constraints or even flow cuts during the event,” Ferrara said.
For all the upside in Friday’s cash markets, West Texas prices tumbled back down after closing in on $1 Thursday. Waha plunged 45.5 cents to average below 35 cents, a decline likely tied to overall weakness in downstream West Coast markets.
SoCal Citygate dropped more than 70 cents to $1.79, while other California points fell a quarter or more. Rockies spot prices were down 15-30 cents at most market hubs.
In Western Canada, system maintenance and price volatility “are the name of the game during injection season and NOVA/AECO C is following the playbook,” according to TPH. Cash prices shed more than $1 over the past week to sit at 57 cents on Thursday. Friday, however, brought about a modest rebound that lifted NOVA/AECO C prices back to C60.5 cents/Gj.
Western Canadian storage deficits sit at 14%, having narrowed from 17% a month ago. TPH is projecting a 5 Bcf build in storage for the week ending Friday (April 26), which would be in line with the five-year average.
Eastern Canada saw its first injection year to date at 2 Bcf, which also marks the first time Eastern Canada storage caverns were above 2018 levels since this past February, according to TPH. Stocks, however, remain around 44% lower than the five-year average.
“Canadian gas storage data provides interesting reference data points but until TransCanada Corp.’s NGTL system can function in a more normal manner, these storage data points don't carry the price implications they once did,” TPH analysts said.