Natural gas futures were trading sharply lower early Monday as analysts were monitoring a significant drop-off in liquefied natural gas (LNG) feed gas demand. The September Nymex futures contract was down 7.0 cents to $2.051/MMBtu shortly after 8:30 a.m. ET.
Along with production reaching new highs, a drop in deliveries to Cheniere Energy Inc.’s Sabine Pass and Corpus Christi LNG terminals was one of the “main stories” for the natural gas market coming out of the weekend, Bespoke Weather Services said in a note to clients early Monday.
“It is unclear how long the drop will last, but it is something that can help keep cash prices quite weak until the level of feed gas intake returns back to normal levels,” Bespoke said. Combined with stronger production, “these items are helping to push prices much lower already this morning before even getting to today’s cash trading, raising the possibility that prices can drift down to the $2.00 level in the September contract.”
Deliveries to U.S. liquefaction facilities first began to dip on Friday, according to Genscape Inc. The firm estimated that U.S. LNG demand as of early Monday was down 1.85 Bcf/d compared to the seven-day average prior to the initial decline.
“Delivery nominations to Sabine Pass have fallen precipitously since Aug. 1, to 2.3 Bcf/d from gas day Aug. 4, down about 1.2 Bcf/d from the seven days prior to the feed gas decline,” Genscape analyst Allison Hurley said. “Because nominations declines to Sabine are present across each of the interstate pipelines feeding the terminal,” Genscape’s team does not believe the outage stems from planned maintenance at the Creole Trail Gillis compressor station scheduled to start Monday.
“While Genscape LNG analysts are not yet attributing dips in feed gas nominations to an extended train outage, analysts are anticipating turnaround maintenance to occur at Train 3 and 4 sometime this year thanks to guidance from Cheniere’s 1Q2019 earnings call. Note that Trains 1 and 2 underwent turnaround maintenance earlier this year.”
As for the Corpus Christi terminal, nominations dipped to 819 MMcf/d Saturday, down about 530 MMcf/d compared to the prior seven-day average, Hurley said. Deliveries for Monday’s gas day showed further declines, down to 780 MMcf/d for the evening cycle.
“There are currently no planned maintenance events posted on Corpus Christi Pipeline’s website” that would account for the drop in deliveries, according to Genscape.
Meanwhile, as for the latest forecast, Bespoke said changes to the weather outlook over the weekend were “generally small,” continuing to show a variable pattern “skewed to the hotter side of normal” overall.
“Over the next couple of weeks, the focal point for strongest anomalous heat will be in the southern half of the nation, with Texas likely to see their hottest weather of the summer,” the forecaster said. “This is different from the hotter pattern in much of July, where it was the Midwest to East seeing the strongest heat relative to normal.”
September crude oil futures were off 80 cents to $54.86/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was trading about 2.6 cents lower at $1.7554/gal.