Rebounding production and a lack of significant cooling demand gains from the latest forecasts facilitated selling in the natural gas futures market Tuesday. In the spot market, pipeline maintenance continued to pressure Midcontinent and West Texas prices; the NGI Spot Gas National Avg. climbed 14.0 cents to $1.945/MMBtu.
The soon-to-expire June Nymex futures contract eased 1.6 cents to settle at $2.582, up several cents from the session’s low at $2.535. Further along the strip, July settled at $2.584, down 2.7 cents, while August slipped 2.8 cents to $2.593.
Bespoke Weather Services pointed to higher production numbers coming out of the Memorial Day holiday to explain in part the selling in the futures market Tuesday.
“Even though it still has not yet gotten back to its highs, the move was enough to pressure all of the natural gas curve, especially with the trend toward less heat once we move beyond this current week, as the strong eastern U.S. ridge that has led to numerous record highs in the Southeast finally weakens,” Bespoke said.
“...We made it through options expiration without many fireworks, as we weren’t quite close enough to either the $2.50 or $2.60 strikes to gravitate one way or the other, but suspect there can be noise around the June contract expiry” on Wednesday.
NatGasWeather tallied a decline of 3-4 total degree days from the midday Global Forecast System data Tuesday.
Even though the southern United States will be “occasionally hot going forward, coverage and intensity of heat isn’t enough to impress as hefty builds into supplies are expected to continue through the first half of June,” the forecaster said.
Energy Aspects issued a preliminary estimate calling for the Energy Information Administration (EIA) to report a 99 Bcf injection for the week ending May 24.
“A 2.8 Bcf/d surge in gas into power week/week nearly offsets a 2.5 Bcf/d week/week decrease in residential/commercial demand” during the period, the firm said. “A nearly 0.3 Bcf/d week/week decline in production is offset by a 0.3 Bcf/d gain in net Canadian trade, leaving the injection level more or less flat week/week.”
Lower 48 dry gas production reached a 56-day high over the weekend, hitting 88.57 Bcf/d on Sunday, and output has remained above the 88 Bcf/d mark since then, according to estimates from Genscape Inc.
“During the holiday weekend, production averaged close to 88.5 Bcf/d, marking a 1.34 Bcf/d increase above the prior week’s production average,” Genscape senior natural gas analyst Rick Margolin said. “The boost has been predominantly driven by more than 0.96 Bcf/d of growth in the Northeast, along with a 0.38 Bcf/d increase in Permian output, 0.22 Bcf/d of increased Texas production and about 0.18 Bcf/d more out of the Rockies.”
In the Northeast, about 0.53 Bcf/d of growth week/week has come from West Virginia, where operational issues impacting two MarkWest processing plants, combined with planned maintenance on the Columbia Gas and Texas Eastern Transmission (Tetco) pipelines, restricted output last week, Margolin noted.
“While the recent gains are lifting the month’s daily production average to over 87.61 Bcf/d, volumes are still slightly trailing our forecast by about 0.48 Bcf/d,” the analyst said. “This is primarily due to the aforementioned unplanned events in the Northeast, along with Gulf Coast production coming in more than 0.28 Bcf/d below forecast.
“Gulf Coast production has lagged because of unforeseen operational issues on pipelines, processing and field production, with the region having been battered by flooding, tornadoes and power outages.”
After posting extreme discounts late last week coinciding with a force majeure on Natural Gas Pipeline Co. of America (NGPL), spot prices in West Texas and the Midcontinent remained under pressure Tuesday. The latest information from NGPL indicated northbound flows through Kansas would remain restricted through the end of the work week.
NGPL notified shippers Tuesday that a force majeure event at its Compressor Station (CS) 194 in Ellsworth County, KS, first announced last week, was expected to continue through Friday. From Wednesday through Friday, primary firm and secondary in-path firm transports through CS 194, located in Segment 11 of NGPL’s Midcontinent Zone, will be limited to 40% of contracted quantities, up from 37% previously, the operator said.
Meanwhile, a second NGPL force majeure was underway Tuesday associated with pipeline remediation affecting flows between CS 156 and CS 801 in Oklahoma. That restriction is also expected to last through Friday, the pipeline told shippers Tuesday.
The NGPL maintenance has coincided with significant downward pressure on spot price locations in the Midcontinent and further south in the Permian Basin. After setting a record low on Friday, NGPL Midcontinent dropped further into the negatives Tuesday, slipping another 61.5 cents to average minus 67.5 cents.
In West Texas, meanwhile, most regional points continued to trade well into the negatives, though not quite as negative as Friday’s prices. Waha averaged minus $1.685, up 62.0 cents from Friday’s average.
Elsewhere, starting Wednesday, maintenance on two Tetco lines between the Five Points and Somerset compressor stations in Ohio could restrict export capacity from the pipeline’s M2 zone to locations downstream of Five Points, according to Genscape analyst Josh Garcia.
“The first phase will last from May 29 to June 2 and will reduce capacity at Five Points to 298 MMcf/d, with the subsequent phase reducing capacity to 549 MMcf/d” starting next Tuesday (June 4) and lasting until June 18, Garcia said. “Flows at Five Points have averaged 615 MMcf/d and maxed at 668 MMcf/d over the last two weeks, meaning up to 370 MMcf/d of flows will be impacted.
“The majority of this gas flows to the Lebanon Lateral, serving large delivery interconnects with Panhandle Eastern and Texas Gas Transmission. This outage will bring slight bearish pressure on M2 prices and bullish pressure for Midwestern hubs.”
In Appalachia, Texas Eastern M-2, 30 Receipt added 5.0 cents to $2.145 Tuesday, while further downstream, most Midwest locations also strengthened on the day. Chicago Citygate picked up 7.0 cents to $2.360.
From East Texas through the Southeast and into the Mid-Atlantic, where some of the hottest temperatures in the Lower 48 have been observed as of late, prices were steady Tuesday.
“Weather systems will continue across the West and Plains with highs of 50s to 70s,” NatGasWeather said in its short-range outlook Tuesday. “Texas to the Mid-Atlantic Coast will be very warm to hot, with highs of 80s and 90s as strong high pressure dominates, hottest across the Southeast with 95 to 100 degrees. Mostly warm conditions continue from Chicago to New York City, with highs of 70s and 80s, although with showers across the Upper Midwest.”