Further demand gains in the weather outlook and reports of supply disruptions helped inspire a natural gas futures rally to open the work week Monday. In the spot market, hotter temperatures supported Southeast gains, while price moves were mixed in the West; the NGI Spot Gas National Avg. added 6.0 cents to $2.125/MMBtu.
The June Nymex futures contract rallied 4.2 cents to settle at $2.673 after probing as high as $2.700. Further along the strip, July settled at $2.699, up 3.5 cents, while August gained 3.4 cents to $2.714.
NatGasWeather attributed Monday’s rally to a combination of demand gains in the latest forecasts and reports of a drop in production.
“Yet again, the weather data isn’t quite as bearish for the next seven days due to a mix of chilly conditions over the West and Plains, and hot conditions across the South and Southeast,” the forecaster said. “This has led to reductions in build size for the next several” weekly Energy Information Administration storage reports, indicating one or two upcoming injections could “come in barely under 100 Bcf.”
The market as of Monday appeared “satisfied demand was added through next weekend, but will still likely view the pattern around the start of June as not hot enough to impress.” However, “if demand again gets added” as days in the current Week 2 outlook period roll into the near term, “the markets are certain to notice,” according to NatGasWeather.
Radiant Solutions on Monday was calling for record heat in the Southeast in the six- to 10-day forecast window.
“A highly amplified pattern regime continues for this time frame, with cool troughing over the West and strong ridging centered over the South,” Radiant said. “Record heat is forecast under the South ridge, with temperatures peaking in the mid to upper 90s in Atlanta. Dry conditions will also accompany, and the forecast resides on the warmer side of model consensus from the Texas toward the Southeast.
“Heat will build northward into the southern Midwest and Mid-Atlantic at times, but an active storm track through the Midwest will pull cooler air into the Rockies, Plains and western Midwest during the second half.”
As for the 11-15 day period, Radiant noted “similar themes” carried over from Friday’s forecasts, but the outlook leans toward additional warming for the South.
“This comes as models continue to hold ridging over the area,” the forecaster said. “Above normal temperatures persist through the period in the Southeast, while unsettledness along the ridge’s northern periphery has temperatures being closer to normal in the Northeast.”
With hotter temperatures ahead, spot prices gained by double-digits at most locations in the Southeast Monday.
Radiant Solutions was calling for temperatures in Atlanta to warm up over the next several days, with highs building from the mid 80s Monday into the mid 90s by the end of the week.
Further to the north in the Mid-Atlantic, the forecaster predicted above normal temperatures in Washington, DC, Monday would give way to more moderate conditions Tuesday and Wednesday. But the nation’s capital should see highs climb into the mid to upper 80s by the weekend, with temperatures averaging around 5-10 degrees warmer than normal, according to the forecaster.
In Appalachia, amid reports of operational issues and supply cuts in the region Monday, prices strengthened. Columbia Gas gained 10.0 cents to $2.430, while Tennessee Zn 4 Marcellus jumped 20.5 cents to $2.210.
As of Monday Columbia Gas Transmission (TCO) was dealing with the effects of an “operational event” at the MarkWest Salem Plant in West Virginia, estimated to impact around 2.1 million Dth of supply delivered onto the pipeline across seven receipt locations.
TCO first notified shippers of the event on Sunday but followed up Monday to add that “MarkWest has since clarified that the outage was on a line feeding the Hopedale Fractionation Plant in Salem, WV.” TCO said it expected the issues to be resolved later Monday; as of the time of writing the operator had not posted any further information on the event.
Meanwhile, in addition to the TCO restrictions, Genscape Inc. notified clients of a force majeure declared Sunday morning at the MarkWest Mobley Plant in West Virginia that required Equitrans to reduce operational capacity at two locations by more than 400 MMcf/d and as much as 145 MMcf/d, respectively.
Equitrans notified shippers of cuts to receipts at Meter 24605, where operational capacity was initially reduced to 125,000 Dth. In a subsequent notice on Monday, the pipeline announced that it had increased capacity there to 480,000 Dth.
The pipeline also notified shippers of further constraints at its Plasma-OVC compressor, where flows were already expected to be limited due to planned maintenance scheduled this week, according to Genscape analyst Anthony Ferrara.
Elsewhere, amid generally cool and stormy conditions across the western third of the Lower 48, price adjustments were mixed in the Rockies and California to start the week. PG&E Citygate and SoCal Citygate both gained sharply day/day, though other locations in California eased. SoCal Border Avg. slid 15.0 cents to $1.350.
Four-day maintenance starting Tuesday could impact about 82 MMcf/d of southbound flows through the El Paso Natural Gas (EPNG) Dutch F compressor in western Arizona, according to Genscape analyst Matthew McDowell.
“The Dutch F serves as an interconnection between EPNG’s North and South Mainlines just upstream of the Arizona/California border,” McDowell said. “It has bidirectional capability but almost always flows north-to-south, usually at or near capacity.”
Operational capacity is expected to be reduced to 484 MMcf/d for much of the event, but at times could drop as low as 436 MMcf/d. “The past month has seen average flows at 566 MMcf/d, so these restrictions would represent cuts of 82 MMcf/d and 130 MMcf/d, respectively,” the analyst said. “A somewhat comparable reduction occurred during the shoulder season in mid-October 2017. Although that event did cut about 150 MMcf/d, there was no significant movement in SoCal Border basis.”
Further upstream, West Texas prices came under even more significant downward pressure Monday after several locations had already averaged in the negatives prior to the weekend. The downstream restriction on EPNG likely didn’t help matters for Permian Basin producers who have routinely found themselves squeezed by limited pipeline takeaway in attempting to market their associated gas output.
Waha dropped another 21.5 cents on the day to average negative 33.5 cents.