Natural gas futures sold off Monday as forecasts showed near-term heat easing off by next week. Meanwhile, with some of the hottest conditions of the summer to date expected this week, but with the associated demand potentially tempered by the Fourth of July holiday, spot prices mostly skidded lower; the NGI Spot Gas National Avg. dropped 1.5 cents to $1.930/MMBtu.
The August Nymex futures contract settled 4.1 cents lower at $2.267. The front month plunged as low as $2.217 around midday Monday before gradually gaining into the settle. Further along the strip, September dropped 4.0 cents to settle at $2.242, while October settled at $2.276, off 3.5 cents.
NatGasWeather observed that prices retreated Monday after the overnight data failed to deliver hotter trends for the second week of July. The coming week should still prove “quite hot” for much of the United States, especially the Southeast and Mid-Atlantic, but by next week, cooler conditions over the northern and eastern portions of the country should drop daily cooling degree day totals back to near-normal levels.
“The natural gas markets appear to be disappointed the July 8-13 period failed to trend notably hotter across the North and East, likely aiding” in Monday’s selling, NatGasWeather said. “We continue to look to around July 15 for better chances of more ominous heat returning after this week.”
Weather this week will give the market a good opportunity to gauge the extent of power demand under hotter conditions, according to analysts with Drillinginfo.
“The fundamental indicators remain bearish, but the coming week of demand may provide an indication of summer demand later in the season,” Drillinginfo said. “Any rally in the coming week near the $2.40 area will likely find sellers, and the lows from two weeks ago down to $2.151 will find buyers. The market remains range bound, with a negative bias.”
EBW Analytics Group CEO Andy Weissman identified two conflicting drivers currently at work in the market.
“This week, as the July Fourth holiday approaches, we expect commercial and industrial demand to begin falling off rapidly, depressing cash prices,” Weissman said. “The market is likely to be mindful, however, that if current weather forecasts verify, power sector demand for natural gas could rise sharply after the holidays, strengthening the cash market and cutting weekly injections by more than 50% compared to recent levels.
“Faced with these competing factors, natural gas is unlikely to make a significant move either up or down prior to the holiday,” he said. “After July Fourth, however, the stage could be set for gains of 10% or more during the first few weeks of July.”
Hot Week? Traders Not Impressed
With many people making plans to trade in their office clothes for a grilling apron later this week, U.S. forecasts showing plenty of heat for key markets in the days ahead offered little uplift for struggling cash prices Monday. Even in regions expected to see some of the hottest temperatures, pricing locations posted discounts. Benchmark Henry Hub set a bearish baseline, dropping 9.5 cents to $2.255.
NatGasWeather on Monday called for “minor cooling” for the Northeast, but with temperatures still approaching 90 degrees over the southern Great Lakes and Ohio Valley.
“It will be quite hot this week over the Southeast and up the Mid-Atlantic coast with highs of lower to mid-90s and where strong regional demand will occur,” the forecaster said. “Portions of Texas and the South will cool a few degrees early this week as a weather system stalls with showers to ease highs into the upper 80s.
“National demand will increase late in the week as high pressure strengthens across the southern and eastern halves of the country, with highs of 90s gaining in coverage, including returning across the important corridor from Chicago to New York City.”
Prices sold off throughout East and South Texas as well. Houston Ship Channel tumbled 10.5 cents to $2.130.
Elsewhere, price moves were mixed throughout the Northeast and Appalachia Monday, with a few locations recording modest day/day gains.
Changes to the Transcontinental Gas Pipe Line (Transco) segment capacity reporting, effective Monday, appeared to erroneously remove 3.6 Bcf/d of Pennsylvania production from Genscape Inc.’s latest supply sample, the firm said.
For Monday’s gas day, “Transco is reporting zero values for all production points in Pennsylvania,” Genscape analyst Josh Garcia said. “Collectively, these points typically represent around 3.6 Bcf/d of sample production...The errors are likely related to the changes Transco is implementing in its reporting.”
Last week Transco sent out a notice to shippers that beginning Monday (July 1) it was revising the list of “throughput section boundaries” reported on when posting market and production constraints information and listing operational capacity on its electronic bulletin board.
In the West, Southern California locations posted discounts ahead of relatively mild demand expected in the region this week. SoCal Citygate dropped 30.0 cents to $2.035, while SoCal Border Avg. slid 20.5 cents to $1.900.
Southern California Gas was projecting system demand of around 2.2 million Dth/d for the first few days of the work week, with demand expected to drop below 2 million Dth/d for the July Fourth holiday.
Forecaster Radiant Solutions was calling for near-normal temperatures on Monday in Burbank, CA, including highs in the mid-80s, to ease off to below-normal levels by Wednesday, including highs in the upper 70s.
Further upstream in the Rockies, most locations traded close to even.
Maintenance on the Rockies Express Pipeline could impact up to 202 MMcf/d of northbound flows out of Colorado for Tuesday and Wednesday, according to Genscape analyst Anthony Ferrara.
“Maintenance will be performed at the Meeker Compressor Station, which will limit capacity through Segment 100 in northwestern Colorado to 1,088 MMcf/d,” Ferrara said. “Over the past 14 days, Segment 100 has averaged 1,231 MMcf/d and maxed at 1,290 MMcf/d.”