Friday’s natural gas futures trading suggested a market focused squarely on winter, with the front month easing lower despite healthy gains further along the strip. The November Nymex contract settled at $2.214/MMBtu, off 0.4 cents, while December and January each rallied 4.0 cents or more.
Meanwhile, early season winter conditions moving into the central Lower 48 Friday couldn’t breathe much life into a moribund cash market, where heavy discounts on deals for weekend and Monday delivery were the norm; NGI’s Spot Gas National Avg. dropped 17.5 cents to $1.590.
For Friday’s session, “the story in terms of price action was in the spreads,” Bespoke Weather Services said. “...Cash prices were very weak” Friday “as storage fills up and we head into an overall weaker demand period. With forecast demand actually moving lower over the next week to 10 days, that situation seems unlikely to improve.”
While the firm said it sees “risks for even lower prices yet, given that the entire winter is still ahead of us, hints of cold can give a little support to the markets, and we have seen that at the ends of some recent model runs. We do not believe the pattern will actually move to a higher demand regime but must respect times when models show some potential.”
Looking at the balance picture, the Energy Information Administration (EIA) on Thursday reported a 98 Bcf injection into storage facilities for the week ending Oct. 4, a figure that fell well within the wide range of expectations. The reported injection was several Bcf above last year’s 91 Bcf as well as the five-year average of 89 Bcf, according to EIA.
Total working gas in storage rose to 3,415 Bcf, which puts inventories at a 472 Bcf surplus over last year and just 9 Bcf below the five-year average, according to EIA.
Genscape Inc. said the injection implies the market was about 5.7 Bcf/d looser than the five-year average when compared to degree days and normal seasonality.
“However, the additional looseness in this week’s stat should be taken with a large grain of salt,” senior natural gas analyst Rick Margolin said. “Residential/commercial demand always lags during the initial increase in heating degree days at the beginning of the heating season for a variety of reasons that include residual heat in buildings and the fact that some people haven’t yet turned on their furnaces.”
That inventories now sit so close to the five-year average represents a “remarkable tightening considering injection season opened at a 495 Bcf deficit.”
The market may have “narrowly avoided” a third consecutive EIA report above 100 Bcf, but a return to triple-digit territory “looks inevitable” for the next inventory report, reflecting “trough demand for the fall season” during the recently concluded week, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
As for the 98 Bcf injection for the week ended Oct. 4, “it could have been much worse, as degree days were a whopping 40% above normal and, on a weather-adjusted basis, the build indicates a 4 Bcf/d oversupplied market,” the TPH analysts said.
The upcoming EIA report will see impacts from a roughly 5 Bcf/d drop in power burns, partly due to blackouts in California that temporarily cut as much as 1.7 Bcf/d of demand, according to TPH.
“Offsetting the drop in power demand is a roughly 1.2 Bcf/d increase in residential/commercial demand, which has been slow to pick up given the lingering summer weather,” the analysts said.
Spot prices headed lower for the most part Friday, including a double-digit decline for benchmark Henry Hub, which averaged $2.075.
A taste of winter for the central Lower 48 Friday did little to stoke buying interest. Northern Natural Ventura skidded 11.5 cents to $1.680, while Northern Natural Demarc dropped 10.5 cents to $1.700.
The National Weather System (NWS) called for an “early season major winter storm” to continue impacting the Northern Plains into Friday night as an “anomalously cold air mass” was expected to remain over the central part of the country.
“Heavy snowfall across the Northern Plains will continue” Friday night “into Saturday as the storm system will slowly exit the region,” the NWS said. “...A very cold air mass has spread across the Western and Central U.S., and widespread record lows remain likely again on Saturday morning for many locations from the Southern/Central Plains to the Great Basin.”
In the Midwest, Dawn fell 8.5 cents to $1.645.
Working gas in storage at the Dawn Hub reached a record five-year high at 261 Bcf Thursday, 15 Bcf above year-ago levels, according to Genscape analyst Anthony Ferrara, who said this tops the previous five-year high of 260 Bcf recorded in November 2017.
“Storage levels blew past the five-year average back in mid-August,” the analyst said. “...Dawn has had an incredibly strong injection season so far this year, with potentially more to go. Withdrawals from Dawn historically begin in the late October to early November time frame.”
In the Northeast, where Maxar’s Weather Desk was looking for near-normal conditions over the weekend and into Monday, including average temperatures in the upper 50s to low 60s in Boston and New York City, prices fell sharply.
Algonquin Citygate tumbled 45.5 cents to $1.305.
In the West, discounts were widespread as prices continued to moderate following weather-driven gains earlier in the week. Opal plunged 51.5 cents to $1.760 heading into the weekend, while PG&E Citygate, subject to import restrictions from maintenance this month on its Redwood Path, eased 8.5 cents to $3.110.
After pre-emptively shutting off power to more than 700,000 customers due to severe winds creating an elevated risk of wildfires in its territory during the week, Pacific Gas & Electric Co. reported late Thursday that it had restored power to about 426,000 customers, with about 312,000 still without power. The utility posted an update to social media Friday afternoon stating that it had restored power to 74% of customers affected by the safety shutoff.