Late-season heat spurred convincing natural gas spot price gains across the Lower 48 during the trading week ended Sept. 13; even with some discounts in California, the NGI Weekly Spot Gas National Avg. gained 16.5 cents to $2.315/MMBtu.
Lingering summer-like conditions strengthened prices across the southern United States, including at benchmark Henry Hub, which added 18.5 cents on the week to average $2.605. That set the tone for double-digit gains across most regions.
Some toasty temperatures during the week saw Northeast hubs rally, including Algonquin Citygate, which added 31.5 cents to $2.330. Upstream in Appalachia, Texas Eastern M-2, 30 Receipt picked up 18.5 cents on the week to average $1.995.
In West Texas, where the start of flows on the Gulf Coast Express pipeline has helped strengthen basis differentials recently, trading hubs posted larger weekly gains. El Paso Permian added 52.0 cents to average $1.530.
Locations in Southern California and the Desert Southwest, meanwhile, were discounted for the week. SoCal Citygate fell 50.5 cents to average a still-elevated $3.425.
It was probably something other than superstition that had bears fleeing the natural gas futures market Friday even as analysts continued to point to oversupply conditions. The October Nymex contract rallied 4.0 cents to settle at $2.614/MMBtu, capping off a week that saw the front month climb 11.8 cents.
Prices have rallied steadily since bottoming out slightly above the $2.000 level last month, with bullish momentum picking up in recent weeks. The main catalyst for the recent rally has been speculators, heavily short as a group, covering their positions, a number of analysts have said.
Friday’s gains suggested there was “still a little more short-covering” among speculators, INTL FCStone Financial Inc. Senior Vice President Tom Saal said. But that’s not to discount the impact of fundamentals, even amid broader bearish sentiment.
“We’re coming up on winter. We know what happened last November. That’s still in people’s memory,” Saal told NGI. “My guess is that the speculators don’t want to go into winter carrying a large net short position.”
Now that the market has found a little upward momentum, “other types of traders may want to come in and start buying,” possibly in the form of new length among speculators, he said.
As for the weather outlook Friday, Maxar’s Weather Desk observed a mix of changes in its updated 11-15 day outlook, including warmer trends in the Midwest and cooler trends in the East.
“This is a low-confidence period, as model agreement is very poor, with the Euro projecting coast-to-coast aboves” and the Global Forecast System showing “marginal belows across the eastern half and greater warmth in the West,” the forecaster said.
The East also saw cooler changes in the six- to 10-day period, according to Maxar. “High pressure at the onset promotes below-normal temperatures in the East, with a gradual warmup expected thereafter as the high departs...Much aboves remain favored in the Midwest, with less of a cooldown taking place in the latter part of the period. Heat remains steady in the South and Texas.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a leaner-than-expected 78 Bcf build into U.S. natural gas stocks, compared to a 68 Bcf build recorded for the year-ago period and the five-year average 73 Bcf injection.
Predictions had ranged from around 75 Bcf up to 94 Bcf, with major surveys centering around 81-82 Bcf for report, which reflected impacts from the Labor Day holiday and also demand-dampening effects from Hurricane Dorian.
Total Lower 48 working gas in underground storage stood at 3,019 Bcf as of Sept. 6, 393 Bcf (15.0%) more than year-ago levels but 77 Bcf (minus 2.5%) shy of the five-year average, according to EIA.
By region, EIA reported a 37 Bcf weekly build in the Midwest, with a 25 Bcf injection in the East. The Pacific withdrew 1 Bcf on the week, while 6 Bcf was refilled in the Mountain region. In the South Central, EIA recorded a net 2 Bcf injection into salt stocks for the week, with a 10 Bcf build in nonsalt.
“On a weather-adjusted basis, the injection implies current oversupply of around 1 Bcf/d,” analysts at Tudor, Pickering, Holt & Co. (TPH) said. “The market tightened through the week as production moderated,” liquefied natural gas (LNG) feed gas demand “bounced back, and sustained heat pushed power gen sequentially higher as the week progressed.
“Power generation is running nearly 10 Bcf/d above year-ago levels, as summer extends into mid-September, with forecasts showing above-normal temperatures for the balance of the month,” the TPH team said.
Southern California spot prices sold off Friday ahead of an expected drop-off in demand over the weekend. Southern California Gas (SoCalGas) was expecting system demand to fall from more than 2.5 million Dth on Friday to slightly above 2 million Dth on Sunday. Maxar was calling for temperatures to moderate in the region by the upcoming work week, including highs in the low 80s in Burbank, CA, Monday and Tuesday.
Heading into Friday’s trading, a stretch of hot temperatures had driven elevated demand for Southern California, with imports into the region reaching 2.6 Bcf/d, the highest levels since February, according to Genscape Inc. senior natural gas analyst Rick Margolin.
“With constraints through northern import zones still in place, the surge has come into SoCalGas’ Southern Zone,” Margolin said. “A portion of these flow increases have been at the SoCalGas TGN-Otay Mesa point, which imports gas from Mexico via the Costa Azul LNG terminal.”
Amid the recent demand, storage withdrawals had increased to more than 0.7 Bcf/d. Additional access to the restricted Aliso Canyon field, along with the use of other system fields, had helped push month-to-date average withdrawals to 0.84 Bcf/d as of Friday, compared to 0.62 Bcf/d during the comparable year-ago period, according to Margolin.
A potential tropical cyclone was headed toward Florida Friday, and the National Hurricane Center (NHC) was expecting the system to strengthen before reaching the state’s eastern coast over the weekend. As of Friday afternoon the storm, dubbed “Potential Tropical Cyclone Nine,” was about 280 miles east-southeast of Freeport, Grand Bahama Island. NHC expected the disturbance to form a tropical depression or tropical storm later Friday.
In the Midwest, most locations saw discounts of around a nickel as Maxar was predicting highs in the upper 70s for Chicago by Monday. Chicago Citygate gave up 5.0 cents to $2.260. In the Midcontinent, NGPL Midcontinent rallied 25.0 cents to $1.890.
NGPL (aka Natural Gas Pipeline Co. of America) notified shippers that it would be restricting flows for Friday’s gas day due to a force majeure for remediation work on its Amarillo No. 3 mainline between Compressor Station 105 in Cloud County, KS, and Compressor Station 106 in Gage County, NE. The operator said it was lowering flows to 900,000 Dth/d during the restriction, or no less than 72% of maximum daily quantities.