Natural gas futures stalled Monday even as production data trended higher over the weekend. With weather models maintaining a hotter-than-normal period during the last third of the month, the July Nymex gas futures contract slipped one-tenth of a cent to $2.386/MMBtu. August fell 0.8 cents to $2.373.

The direction of spot gas prices was more clear as heat returned to much of the southern half of the United States, with hot weather also moving up the Mid-Atlantic Coast early in the week. The NGI Spot Gas National Avg. jumped 17.5 cents to $2.030.

Despite solid gains in the cash market and summerlike temperatures in several parts of the country, futures trading action was quiet on Monday as traders took a more cautious approach to long-term weather data following Friday’s 6-cent increase at the front of the curve. The July contract started off the session marginally higher and traded in a roughly 6-cent range before going on to settle nearly unchanged from Friday.

Weather data overnight Sunday generally shifted slightly cooler overall, though gas-weighted degree days for the next couple of weeks are still set to average above normal levels thanks to some heat in the pattern in the final third of June, according to Bespoke Weather Services.

“There has been a shift in the orientation of above-normal temperatures, as the anomalous heat looks more focused farther north in the 11- to 15-day than it appeared on Friday,” Bespoke chief meteorologist Brian Lovern said.

The firm also saw some notable model difference at the very end of the month into early July, as the European ensemble data favored a slightly hotter look, while the American data was quick to pull the heat ridge back toward the West and begin cooling the eastern half of the nation. Bespoke’s lean is toward the European model, although the transition showing up at the end of the American data “is something we believe can occur after the first week or so of July, following along with recent pattern cycling.”

Until then, a rather messy pattern was forecast for this week with numerous weather systems bringing areas of scattered showers and thunderstorms, enough over the northern and central United States to result in mostly comfortable highs of upper 60s to 80s, according to NatGasWeather. “Where conditions remain hot is around the periphery of the country where highs will reach the upper 80s to 100s across the West, with 90s for Texas, the South and Southeast.”

It is also expected to be hot at times this week along the Mid-Atlantic Coast, where highs are forecast to reach the 80s and 90s, the weather forecaster said. “Where the pattern finally becomes hot enough is late this weekend as cooling advances across the West and Plains, shifting the hot ridge over the South and East for a modest surge in national demand.”

Meanwhile, production trended higher over the weekend to the highest levels seen so far this month, moving within 0.5 Bcf of the highs from late March, according to Bespoke. Weekend power burns saw bearish revisions as well, which when combined with the higher production, has sent daily balances back in the looser direction, at least for now.

“With that in mind, and the fact that the weather pattern didn’t shift hotter over the weekend, we are back to ‘neutral’ in terms of sentiment for now. We feel like the data likely shows some improvement later this week, but we need to see that confirmed in the burns,” Bespoke’s Lovern said.

On the export front, flows to Mexico have repeatedly set new daily highs since mid-May, but the rate of growth is increasing as deliveries to Mexico’s new Sur de Texas-Tuxpan pipeline have begun, according to Genscape Inc. Since last Thursday (June 13), deliveries have averaged 115 MMcf/d, which has boosted the firm’s daily estimates of total U.S. exports to Mexico to as high as 5.48 Bcf/d on Friday (June 14). South Texas-to-Mexico flows have also moved above the 4 Bcf/d mark.

“We believe these are volumes for testing and linepacking. Our Mexico supply/demand forecast does not model substantial flows to begin until next month, at which time Sur de Texas will enable Mexico to replace a portion of its expensive liquefied natural gas (LNG) imports with lower cost U.S.-sourced gas.”

The ramp-up of Sur de Texas-Tuxpan is forecast to contribute to growth in Genscape’s total U.S.-to-Mexico export forecast, but only for a limited time.

“The system will contribute to notable growth out of South Texas, however, we do not expect the flow rates to be sustained,” Genscape senior natural gas analyst Rick Margolin said. “Toward the end of the year, we expect South Texas flows to Mexico will recede as new Mexican pipelines connecting to West Texas enable Permian gas to steal market share from South Texas supply.”

Meanwhile, Genscape’s Mexico supply/demand forecast shows relatively slow rates of demand growth and slower rates of Mexican production declines.

Cash Hikes On Heat

Solid gains in the cash market were seen across the country Monday even though the latest weather outlooks show this week’s heat not being as intense as initially forecast. Nevertheless, cooling degree days (CDD) are set to increase throughout the week, possibly grazing 35.1 Bcf/d on Thursday, according to Genscape.

Next week’s power demand estimates (for the week ending June 28) lost an estimated 8.7 Bcf versus Friday’s forecast. “However, based on the CDD outlooks, next week is still expected to add 3.2 Bcf/d of gas for power demand versus this week’s current estimates as CDDs continue to ramp up,” Genscape analyst Margaret Jones said.

The strongest gains in the spot market occurred in California, where SoCal Citygate jumped 56.5 cents to $2.595. Although SoCal Citygate is typically more volatile than other California markets, several other pricing hubs also posted noteworthy gains of nearly 50 cents.

The stronger demand could slow the injection rate in Southern California Gas Co.’s (SoCalGas) system-wide storage inventory, which, at around 60 Bcf, is now roughly 110% of the previous two-year average for this date, according to Genscape.

“The Aliso leak was discovered in October 2015; in the five summers before that, mid-June inventories had averaged around 100 Bcf and had ranged from roughly 70 Bcf-120 Bcf,” analyst Joseph Bernardi said. “Following the leak and the resulting caps on working inventory, mid-June inventories have been considerably lower (averaging 56 Bcf) and tighter (with a range of only about 49 Bcf-60 Bcf).”

Meanwhile, SoCalGas announced that injections to Aliso Canyon would be restricted beginning Friday because the field was filled to the maximum authorized amount of 34 Bcf. This would imply a working inventory of about 26 Bcf at the other three storage fields that make up the SoCalGas system, meaning that they are about 50% full, according to Genscape.

“These three non-Aliso fields are lagging behind their 2018 inventories. Last year at this time, they were at about 35 Bcf, or 69% full. However, at that time, Aliso was limited to a maximum working inventory of 24.6 Bcf, so about 10 Bcf lower than the current maximum,” Bernardi said.

With strong demand in California, as well as Texas, prices in the Permian Basin got a reprieve from their recent slide, which had returned cash to negative territory. Although Waha continued to average below zero on Monday, next-day gas traded as high as 16 cents before averaging minus 3.0 cents.

Farther east, Tennessee Gas Pipeline was scheduled to perform maintenance pigging runs at Station 822 in Calcasieu Parish, LA, from Tuesday to Thursday. To perform this, operational capacity will be reduced to 196 MMcf/d.

“Northbound flows have averaged 368 MMcf/d over the past 30 days, although they averaged 206 MMcf/d last week. Should flows return to monthly averages, approximately 168 MMcf/d of flows could be cut,” Genscape analyst Dominic Eggerman said.

With heat building in the Southeast, and Genscape showing CDDs in the region expected to cross above 20 into next week, cash rose between a nickel and 10 cents across the region.

Appalachia spot gas also strengthened with gains of up to 20.5 cents at Tennessee Zone 4 Marcellus, which averaged $2.075.

Similar increases were seen throughout the Northeast, where Iroquois, Waddington climbed 20.5 cents to $2.285.

Across the northern border, Alliance Pipeline in Canada was scheduled to begin a four-day maintenance event Tuesday that will halt all cross-border flow onto Alliance’s U.S. system. All transportation services will be scheduled to zero with firm transportation becoming available June 22-24. Discretionary services were expected to return online with full services being offered by June 26.

The pipeline has averaged 1.7 Bcf/d in flow to the Midwest, according to Genscape. The pipeline transports natural gas liquids-rich wet gas from western Canada, which is processed at the Aux Sable gas processing plant.

Prior events in 2015 and 2016 saw flows limited to zero but due to diverse supply options, basis prices at Chicago Citygate were minimally affected. Trading at Alliance Hub was suspended during these events with small jumps in basis after trading reopened.

On Monday, basis contracted significantly as Chicago Citygate fixed prices jumped nearly a quarter to $2.215, a roughly 17-cent discount to benchmark Henry Hub. Last Friday, Chicago Citygate averaged 33 cents below Henry.