Even after a dramatic plunge at the end of the week, a cold blast that sent temperatures to unusually chilly levels as far as Texas and the South earlier in the Oct. 14-18 period provided enough support to leave most weekly prices in the black. The NGI Weekly Avg. rose 12.0 cents to $1.900.
After a ‘meteorological bomb’ in the Northeast left behind gusty winds, some of the coldest weather of the season so far was funneled into the region, driving up demand and sending prices higher. Transco Zone 6 NY prices shot up 52.0 cents to a $1.830 average, although the pricing hub had traded up to $2.160 earlier in the week.
Similarly stout increases were seen in Appalachia, where Texas Eastern M-3, Delivery was up 50.5 cents to $1.750. Texas Eastern Transmission is also in the middle of several scheduled maintenance events that are limiting gas flows as some points along the pipeline.
Most markets across the Southeast and into Louisiana rose less than 20 cents week/week. In the Midcontinent, NGPL Midcontinent jumped 35.0 cents to $1.385.
Over in West Texas, Waha averaged $1.155 for the week, although trades on Friday were seen as low as 60.0 cents.
The low Permian Basin pricing comes as Kinder Morgan Inc. reported that its 2 Bcf/d Gulf Coast Express pipeline, which began operations last month, was already full. The midstream company also said that its second Permian takeaway project -- Permian Highway -- would be delayed to 2021 after regulatory setbacks.
Over in the Rockies, prices were mixed as a series of frigid blasts began rolling through the region, driving up demand. Cheyenne Hub jumped 22.0 cents on the week to average $1.495, while Northwest Sumas plunged more than $1 to $3.280.
California prices were generally lower, falling around 30 cents or more at major market hubs.
Futures Edge Higher
With colder weather finally showing up forecasts, Nymex futures showed signs of life after sinking to multi-year lows in recent weeks as production continues to overwhelm demand and refill storage at a rapid pace.
A solid run of more than a dime between Monday and Tuesday was only temporarily stalled midweek with a slight backpedal in weather outlooks. Futures got back on track Thursday and Friday, although gains over the two-day period totaled less than 2 cents.
The November Nymex gas futures contract climbed 4 cents from Monday to Friday to settle at $2.32, and December picked up 1.9 cents to reach $2.517.
Interestingly, futures continued to gain ground after the official close of trading on Friday as the latest European weather data added several gas-weighted degree days (GWDD) to the forecast. The ensemble models not only added GWDDs to the current one to 15-day, but suggested Days 16-20 likely would be colder than normal as well, according to Bespoke Weather Services.
“While the market has traded off these run-to-run changes, we have been pointing out that the changes are really ‘noise’, as we are simply seeing minor changes in timing/intensity, not anything that changes the big picture at all,” Bespoke chief meteorologist Brian Lovern said.
That big picture the forecaster sees is one that favors colder-than-normal conditions into the first week of November, which if correct, means that the 11- to 15-day maps remain cold, “and that could be the catalyst the market needs to break out of this range to the upside.”
There are some key technical resistance levels nearby, and gapping up Sunday could force some of the large number of shorts in the market to cover. While that is Bespoke’s lean, it must be cautious, “as any weekend means you have two to three days to watch models potentially shift, and given how weak balances are (as evidenced by the very weak physical market on Friday), any failure of cold sends prices well lower. It will be an interesting weekend of model watching, for sure.”
Regardless of how early November shakes out, the market appears confident in storage inventories and production keeping pace with demand.
On Thursday, the Energy Information Administration (EIA) reported a 104 Bcf injection into inventories for the week ending Oct. 12. The reported build flipped the storage 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 reporting periods each surpassed 100 Bcf, or about 27% more than typical injections for that time of year, according to EIA. With total working gas inventory reaching 3,519 Bcf, stocks snapped a 106-week streak of lower-than-normal natural gas inventories.
The East region currently holds 880 Bcf in storage, which is 80 Bcf below the historical peak observation, according to Mobius Risk Group. The past 10 weeks have shown an average build of 27 Bcf on a range of 21 Bcf to 32 Bcf.
“If similar builds were to continue through the first week of November, the prior peak observation would be challenged, as would regional pricing,” Houston-based Mobius said.
A very similar dynamic exists in the Midwest, while salt storage in the South Central, is 45 Bcf above last year’s record seasonal low, EIA data show.
“It would require theoretical max injections over a consecutive six-week period to threaten peak salt inventory levels, and thus the need to open significant contango between near-term physical pricing and nearby futures months is likely limited along the Gulf Coast,” Mobius said.
With high pressure ushering in mild conditions across much of the country for the next several days, spot gas prices fell 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.
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.
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 Tudor, Pickering, Holt & Associates. 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 said. The firm noted, however, that the next storage injection looks to be “another healthy one” in the 7 Bcf range.