- Weak fundamentals pressure natural gas futures
- August on track to be in Top 8 of all-time hottest in United States
- Waha climbs 48.0 cents to average 92.0 cents
Even as weather data did its part to support natural gas prices, other weak fundamentals sent Nymex futures down a couple of notches to start the week. The September Nymex gas contract settled Monday at $2.105/MMBtu, down 1.4 cents. October slipped 1.6 cents to $2.117.
Spot gas prices were on the rise, however, as a front that cooled the Midwest and East during the weekend moved out, paving the way for much warmer temperatures. Strong gains were seen on both coasts, sending the NGI Spot Gas National Avg. up 12.5 cents to $1.940.
While warmer temperatures were enough to boost cash markets, increasing heat in balance-of-August forecasts proved not enough to convince traders to drive up futures prices. The September contract hit an early intraday day high of $2.157, up nearly 4 cents from Friday, but then softened later in the morning before going on to settle near the lower end of its range.
Weather models trended hotter during the weekend, especially the American ensemble data, which moved in line with the European model in terms of total forecast gas-weighted degree days (GWDD) over the next 15 days, according to Bespoke Weather Services. The changes were generally toward a hotter eastern half of the nation in what is now the six- to 15-day period.
“Texas/South heat still take center stage the next few days before that expansion of heat into the Midwest and East,” Bespoke chief meteorologist Brian Lovern said. “The heat in the South does wane some through the six- to 15-day, but overall, we keep the bias of the pattern easily to the hotter side.”
Bespoke now projects this August will finish hotter than last August based on national GWDDs, and is in the top 8 hottest now for any August in its database, dating back to 1981. “As of right now, we still favor above-normal heat on into September as well,” Lovern said.
Nevertheless, NatGasWeather said the data still doesn’t look as hot as needed Aug. 24-28 as weather systems are likely to find flaws in the hot upper ridge to provide areas of showers and cooling. In addition, the midday American model gave back much of the demand it had added in the previous run.
As such, the firm doesn’t view the pattern as hot enough before and after Aug. 19-24, “which could lead to lower prices in time without further hotter trends.”
The cards are stacked against the near-term gas market as near-record production, lower liquefied natural gas (LNG) intake and growing storage inventories continue to weigh on prices. “Given all that we see from both weather and fundamentals data, we may well simply see another week where prices chop around, barring consistently stronger cash prices this week or LNG coming back higher quicker than expected. Staying in the $2.10-2.15 range seems most likely in the near term,” Bespoke’s Lovern said.
EBW Analytics also projected range-bound trading to take place this week. With Monday and Tuesday expected to be the hottest days of the week, this could help to boost cash prices and potentially lead to a retest of resistance for the September contract at $2.155/MMBtu.
“As the week progresses and temperatures moderate, we expect prices in the day-ahead market at Henry Hub to soften, dropping back below $2.10,” the firm said.
Thursday’s storage report could also negatively impact the market, increasing the year/year storage surplus and reducing the deficit versus the five-year average, adding to the downward price pressure. Early estimates are for a storage injection in the upper 50 Bcf range, which would compare to last year’s 35 Bcf injection and the 49 Bcf five-year average.
With another spike in demand expected around Aug. 19-22, though, any downside price movement this week is likely to be limited, according to EBW. “Prices could then bounce higher again a week from now, before the next major move down occurs later this month.”
Cash Jumps on Heat
Spot gas prices moved significantly higher Monday as strong high pressure was forecast to continue ruling the southern United States, sending temperatures into the 90s to 100s. The hottest conditions were forecast over the Southwest and Texas, but with a weekend cool front exiting the Midwest and Northeast, temperatures there were expected to warm considerably as well.
Highs were forecast to reach the mid to upper 80s from Chicago to New York City on Tuesday but then were set to quickly cool back off mid-week as weather systems return across the northern United States, according to NatGasWeather. Highs are then expected to stall out in the 70s and 80s for the rest of the week.
As for projected demand, Genscape Inc. expects Lower 48 aggregate demand through Friday will average close to 74 Bcf/d. Over the next 14-day period, the firm expects demand to average 72.2 Bcf/d, peaking Tuesday near 74.2 Bcf/d and hitting a 14-day low of 69 Bcf/d at the very back of the period.
With some of the hottest weather on tap for the Southwest, spot gas prices there put up some of the stoutest gains. El Paso S. Mainline/N. Baja jumped 60.5 cents to $2.455.
Hefty power loads in Texas helped lift cash in the Permian Basin, where Waha climbed 48.0 cents to average 92.0 cents. Other pricing hubs across Texas rose only a few cents on the day.
Next-day gas in the Midcontinent and Midwest tacked on less than a dime, as did cash in Louisiana and in the Southeast.
On the pipeline front, ANR Pipeline said it would restrict flows through Jena Southbound by up to 153 MMcf/d on Tuesday. This capacity restriction comes in addition to the planned restrictions Aug. 20-26. In an update posted on Thursday, ANR said that it would limit flows through Jena Southbound by 150 MMcf/d (leaving 1,030 MMcf/d available).
Over the past 30 days, flows through Jena Southbound have averaged 1,051 MMcf/d and maxed at 1,183 MMcf/d, according to Genscape.
Meanwhile, inline inspection tool runs on Natural Gas Pipeline Company of America (NGPL) that were scheduled from Tuesday through Aug. 24 will restrict receipts and deliveries at interconnects with Jefferson Storage, Florida Gas Transmission and Trunkline Pipeline among others in NGPL’s Gulf Coast Zone.
An estimated 74 MMcf/d in deliveries could be impacted, when compared to a preceding 30-day average, and roughly 35 MMcf/d in receipts could be impacted from Jefferson Storage, according to Genscape. During the maintenance period, NGPL will be limiting flows to primary firm transports only through compressor stations 302 and 342 in Montgomery County, TX, and Cameron County, LA.
“It’s worth noting that both of these compressors typically are at maximum capacity with primary firm transports, and this restriction is not a departure from normal operating conditions,” Genscape natural gas analyst Matthew McDowell said.
Over in Appalachia and the Northeast, spot gas prices moved much higher given the hotter forecast in the region. Tennessee Zn 4 Marcellus cash jumped 24.0 cents to $1.635, while most other regional markets rose less than 20 cents.
Algonquin Citygate next-day gas was up 26.5 cents to $2.110, besting other area gains by around a dime.