After hopping in and out of positive territory, natural gas futures ended the day modestly higher as traders weighed a near-term period of elevated demand against outlooks for a more moderate mid-May that would all but certainly lead to a string of hefty storage injections. The June Nymex gas futures contract settled Monday at $2.593/MMBtu, up 1.3 cents. July rose a penny to $2.64.
Spot gas prices were mostly higher with more late-season cold snaps on tap for the northern United States this week, boosting demand. The NGI Spot Gas National Avg. rose 8.5 cents to $2.14.
The series of weather systems, seen lasting through the upcoming weekend, were expected to send Lower 48 demand to more than 70 Bcf/d on a couple of days this week before sliding into the weekend, according to Genscape Inc. Although midday weather data trended slightly milder, the northern tier was expected see chilly temperatures as a cold shot moves across the region. Farther south, temperatures in Texas and across the Southeast were heading higher, with some areas forecast to hit the lower 90s this week.
Genscape’s Daily Supply & Demand model estimated Monday’s demand just shy of 70.2 Bcf/d and Tuesday’s near 72.3 Bcf/d. “Demand through Friday is expected to decline at a daily average rate of about 1.5 Bcf/d, bringing the average from last Friday to this Friday to a forecast 69 Bcf/d,” Genscape senior natural gas analyst Rick Margolin.
Assuming Monday’s and Tuesday’s demand actuals do not deviate radically from Genscape’s estimates, April will close out with a demand average of 70 Bcf/d, according to the firm. “This would be the strongest April since at least 2014, except that last year’s April demand averaged 76.6 Bcf/d due to the coldest April since 1997,” Margolin said.
Once beyond this week, demand levels were expected to return to near-normal levels, still with some slightly elevated cooling degree days (CDD) levels for early May, but heating degree days (HDD) back below normal as colder air pushes out of the nation, according to Bespoke Weather Services. Late May could see a typical warmer season El Niño look, with cooler air in the central United States, the firm said.
Bigger picture and most importantly, national demand is expected to remain light enough to continue the current streak of larger-than-normal builds for at least the next four Energy Information Administration weekly storage reports, NatGasWeather said. There remain weather model differences where the European model remains cooler across the central and northern United States compared to the milder American model, according to the forecaster. “The net result is still numerous builds over 100 Bcf into early June; it's just a matter of by how much.”
That perhaps could be why the Nymex June contract, in its first day in the prompt position, fell as low as $2.546 before going on to strengthen later in the session.
Meanwhile, production this past weekend averaged 87.57 Bcf/d, lifting the month-to-date average to 87.31 Bcf/d, according to Genscape. With the month drawing to a close, production is trailing the firm’s forecast by just 0.42 Bcf/d as a result of unexpected maintenance and other unplanned operational upsets.
At 87.31 Bcf/d, April production is poised to come in about 370 MMcf/d above March, and more than 7.1 Bcf/d greater than April 2018. The greatest year/year gains are out of the East (plus 3.81 Bcf/d), Texas excluding Permian (plus 1.86 Bcf/d), Gulf Coast (plus 1.31 Bcf/d), and the Permian (plus 1.1 Bcf/d). The only year/year declines are out of the Midcontinent (minus 0.34 Bcf/d) and San Juan (minus 0.04 Bcf/d), Genscape said.
Despite the boost in production and more moderate outlook for mid-May, Bespoke said its sentiment remained bullish Monday as liquefied natural gas exports climbed back toward 5.5 Bcf/d and southern heat looked rather impressive this week. “All of these things may allow for supportive cash prices, and it may be that burns will respond better to the boost in CDDs as opposed to HDDs at this point in the season,” Bespoke chief meteorologist Brian Lovern said.
Indeed, the late-season cold blasts lifted cash markets across the country. Modest heating demand was seen as overnight temperatures were forecast to dip into the 20s to lower 40s, according to NatGasWeater. Aiding that modest demand bump were slightly hot conditions over the Southeast, where highs were expected to reach the upper 80s to lower 90s.
Forecasts for Wednesday and Thursday were for a warm break between cool shots that were expected to set up across the southern Great Lakes and East. Highs were expected to once again reach the upper 60s to 80s before a fresh cool shot was expected to track across the northern United States this weekend, NatGasWeather said.
The core of the coldest air was expected through the Northeast, and the pattern of weak cold shots impacting the northern United States and slightly hot conditions blanketing the southern part of the country was expected to continue through mid-May.
The chillier air drove rather significant gains in cash prices considering the typical low-demand part of the year. In the Northeast, Algonquin Citygate spot gas climbed 12.5 cents to $2.535, although most of the rest of the region’s gains were capped at around 15 cents.
Increases across Appalachia were limited to around a dime at most pricing hubs, although Tennessee Zn 4 Marcellus next-day gas shot up 20 cents to $2.11.
Over in the Southeast, Transco Zone 5 jumped 11.5 cents to $2.55, although smaller increases were seen throughout the rest of the region and into Louisiana.
Permian Basin pricing suffered steep declines that led to the return of negative pricing in the region. Waha plunged 26.5 cents to average just 5.5 cents, although trades were seen as low as minus 10 cents.
Elsewhere in Texas, declared a force majeure for unplanned repairs at Tennessee Gas Pipeline’s Station 409 in Edinburg, TX, restricting gas flows of up to 200,000 Dth/d through segment 490 FH, otherwise known as the Donna Lateral. There was no estimated return to service of Station 409.
Demand markets downstream of the Permian Basin, much like the majority of the country, posted notable increases. Malin was up 30.5 cents to $2.00, and Kern River in the Rockies was up 37 cents to $1.97.