After a week marked by significant swings, natural gas futures held relatively steady on Friday as weather models remained at odds over long-term cold. The November Nymex natural gas futures contract traded both sides of even before eventually settling a mere two-tenths of a cent higher at $2.320/MMBtu. December also rose fractionally to $2.517.

Spot gas prices were definitively lower as comfortable temperatures were projected to keep demand light through the early part of the week ahead and as Tropical Storm Nestor was on track to make landfall near the Florida Panhandle over the weekend. The NGI Spot Gas National Avg. fell 22.0 cents to $1.715.

Gulf of Mexico (GOM) producers continued to monitor Nestor, which was forecast to approach the northern Gulf Coast through Friday night and move inland across portions of the southeastern United States over the weekend, becoming a post-tropical cyclone, according to the National Hurricane Center. Nestor was expected to then move offshore the coast of North Carolina into the western Atlantic by late Sunday.

Royal Dutch Shell plc, one of the largest operators in the deepwater GOM, remained on alert Friday afternoon, spokesperson Ray Fisher said.

"The contracted Transocean Mobile Offshore Drilling Units have been safely shut-in in the Mississippi Canyon area, and we have also suspended some marine-related operations until conditions improve over the weekend,' Fisher told NGI. "We are not evacuating personnel from our assets, and we continue to actively monitor the storm’s development and will respond accordingly if needed.”

Chevron Corp. spokesperson Veronica Flores-Paniagua said the operator evacuated nonessential personnel from its Petronius facility, but production at all its Chevron-operated GOM assets remains at normal levels. "We will continue to monitor the system and remain focused on the safety of our workforce, the integrity of our facilities and the protection of the environment."

Occidental Petroleum Corp. safely removed all nonessential personnel from its operated eastern and central GOM facilities by early Friday, and it expected to return staff to the platforms over the weekend.

As for other areas of the United States, a span of mild weather was in the forecast through midweek before a series of cold blasts were expected to push across the Canadian border and deep into the United States, including at times into Texas and the South. The first cold shot is slated for Wednesday through next Saturday (Oct. 26), with potentially a brief break Oct. 27-28, according to NatGasWeather.

“This first cold shot will drop lows into the 20s and 30s across the Midwest and Northeast, locally colder, but the more ominous one is expected Oct. 29-Nov. 2 and where lows are more likely to dip into the teens to 30s for widespread stronger-than-normal demand,” the firm said.

Friday’s midday Global Forecast System (GFS) lost a few heating degree days (HDD) for Oct. 25-27, but finished the run strong with frosty conditions expected to invade the United States Oct. 29-Nov. 2.

“The latest GFS also suggested cold would last into Nov. 3-4,” NatGasWeather said. It does, however, see risks for a few HDDs to be lost for the last week of October, “but with the potential for cold lasting longer into the first several days of November.”

Friday’s modest changes throughout the Nymex futures curve suggested that natural gas traders were content with the market’s reaction to Thursday’s government storage data. The Energy Information Administration (EIA) said inventories as of Oct. 11 had grown by 104 Bcf, flipping the deficit to the five-year average to a small surplus for the first time in two years.

Weekly injections in three of the past four weeks each surpassed 100 Bcf, or about 27% more than typical injections for that time of year, according to EIA. With a total working gas inventory level of 3,519 Bcf, stocks also snapped a 106-week streak of lower-than-normal natural gas inventories. Broken down by region, the South Central added 39 Bcf into storage, including a 17 Bcf injection into salt facilities and 22 Bcf into nonsalts. Midwest inventories rose by 35 Bcf, while the East rose by 26. Pacific stocks held steady at 296 Bcf.

Excluding weather-related demand, Thursday’s injection implied that market demand was 2.14 Bcf/d looser versus the same week last year and has averaged 3.00 Bcf/d looser over the past four weeks, according to Raymond James & Associates Inc.

Tudor, Pickering, Holt & Co. (TPH) analysts said the 104 Bcf build “wasn’t pretty but it came in bullish to expectations” and with residential/commercial demand picking up, they expect this will mark the low point for shoulder-season demand and the last triple-digit build. TPH projected the next EIA report to reflect a 81 Bcf injection, versus norms of around 75 Bcf.

“Given the oversupply, we expect inventories to continue to build versus the five-year average and exit 2019 at around 3.5 Tcf or about plus 9% versus the five-year average,” TPH analysts said. Key to firming up the market in 2020 will be the supply response to lower pricing and with producers messaging maintenance capital expenditure (capex) budgets in 2020, the firm expects to see volumes begin to rollover in the new year.

However, a stockpile of drilled but uncompleted (DUC) wells gives producers a lever to reduce capex while continuing to flow new production, according to EBW Analytics Group.

Every major Lower 48 region covered in the EIA's latest Drilling Productivity Report reported more wells completed than drilled, reducing the DUC inventory. Nevertheless, a considerable stockpile of DUCs, especially relative to the rate of DUC declines over the past three months, suggested the onshore basins may be able to sustain current production and potentially grow output despite rig declines.

“Producers can -- and likely will -- elect to cut completion spending in tandem in an effort to reduce total costs,” EBW said. “The straight-line conclusion that a rig count decline immediately results in lower production, however, will not necessarily be borne out.”

More Cash Losses

With high pressure ushering in mild conditions across much of the country for the next several days, spot gas prices continued to fall on Friday despite a couple of pipeline maintenance events set to take place.

Some of the steepest losses occurred on the West Coast, where Southern Border, PG&E dropped 34.5 cents to $1.390. Markets further north in California also posted substantial losses.

The one glaring exception was SoCal Citygate, which jumped nearly 50 cents day/day to $3.550.

A notice on the Southern California Gas Co. (SoCalGas) electronic bulletin board indicated a high operational flow order for the weekend from excessive amounts of gas scheduled on the system. The pipeline said storage injections were being used for balancing.

The strong system demand occurred as temperatures in Los Angeles were forecast to climb into the lower 90s by Monday, a level expected to hold through at least Tuesday before a slight pullback, according to AccuWeather.

Over in the Rockies, Transwestern San Juan cash prices plunged 41.5 cents to $1.295, but most other pricing locations fell less than 25 cents.

With such steep discounts seen across downstream markets, producing regions in Texas also plummeted. Waha tumbled 51 cents to average just 70 cents. Texas Eastern S. TX was down 14.0 cents to $1.985.

On the pipeline front, Tennessee Gas Pipeline is scheduled to conduct an electrical inspection at compressor station 25 in Montgomery County, TX, beginning Monday to Oct. 28, limiting operational capacity at the station to 685 MMcf/d, according to Genscape Inc.

Over the past 30 days, flows through the station have averaged 801 MMcf/d. “Flows will likely be cut by 116 MMcf/d, although they have maxed at 840 MMcf/d,” Genscape natural gas analyst Dominic Eggerman said.

In the country’s midsection, losses of 20-30 cents were the norm, while most parts of Louisiana and the Southeast saw decreases capped at 20 cents.

Farther East, Columbia Gas spot gas fell 30.0 cents to $1.590, while Algonquin Citygate dropped 37.5 cents to $1.660.

Texas Eastern Transmission (aka Tetco) was scheduled to perform pipeline maintenance from Saturday (Oct. 19) through Oct. 28, potentially limiting up to 156 MMcf/d of receipts onto Nexus Pipeline in West Virginia. From the Nexus side, the “MARK WEST-MAJORSVILLE, MARSHALL CO., WVA” location (Meter N4734 on Nexus) is to be completely shut in for the duration of the event.

“The reason that this maintenance event on Tetco will impact receipts onto Nexus is that the receipt location is leased capacity by Nexus on Tetco,” Genscape analyst Anthony Ferrara said. “This means that the gas must physically flow on Tetco to get to Nexus and will therefore be impacted by the maintenance.”

Over the past 30 days, receipts at Meter N4734 on Nexus averaged 125 MMcf/d and maxed at 156 MMcf/d, according to Genscape.

In Canada, NOVA/AECO C spot gas fell nearly 20 cents to average C$2.105/GJ.

Despite the decline on Friday, prices have been relatively well supported by the ability of storage to soak up excess supply. Changes to TC Energy Corp.’s NGTL system appear to be working as designed, evidenced by an 8 Bcf injection into storage, relative to norms of 4 Bcf, according to TPH. The build was the third largest of the year and more than the last five weeks combined.

“From a storage perspective, it’s too little, too late, as we’re only forecasting three more weeks of builds before withdrawals start,” TPH analysts said. They noted, however, that the next storage injection looks to be “another healthy one” in the 7 Bcf range.