• December Nymex futures up 8.1 cents to $2.714; January up 7.0 cents to $2.802
  • “Demand was most notably added Nov. 12-15 as the GFS favors another strong cold shot into the northern U.S.”: NatGasWeather
  • Production data indicating early-winter freeze-offs, says Genscape’s McMurrer
  • Henry Hub cash slides as discounts widespread heading into weekend

Early-winter volatility continued in the natural gas futures market Friday as colder-trending weather data helped launch a swift midday rally. After trading as low as $2.575/MMBtu, the December Nymex contract went on to settle near the session’s high at $2.714, up 8.1 cents on the day. January picked up 7.0 cents to settle at $2.802.

In the spot market, more cold expected for the Midwest and Northeast over the weekend wasn’t enough to lift prices on deals for three-day delivery; widespread discounts dropped the NGI Spot Gas National Avg. 15.5 cents to $2.190/MMBtu.

Futures prices appeared to respond to the addition of “numerous” heating degree days in the Global Forecast System’s (GFS) midday run, according to NatGasWeather.

“Demand was most notably added Nov. 12-15 as the GFS favors another strong cold shot into the northern U.S.,” the forecaster said.

Still, the outlook advertised in the European model Friday “just wasn’t as cold as the GFS,” NatGasWeather said. “It still has three cold shots into the U.S. the next two weeks, but the one” lining up to arrive closer to mid-November “isn’t nearly as impressive with the amount of cold.”

This sets up “big risks over the weekend whether either the GFS” proves to be “much too cold or the European not nearly cold enough. We must expect a gap depending on which is more correct.”

Aside from boosting heating demand, the early-winter chills also appear to be causing some freeze-offs, according to Genscape Inc. This would mark the earliest that cold weather has impacted production since 2013, analyst Nicole McMurrer said in a note to clients Friday.

Cumulative freeze-offs during the past week rose to around 2.45 Bcf as of Friday, although that day’s estimate “may be overstated by scheduling issues corresponding with the first of the month, when pipe scrapes come in much lower than their actuals,” McMurrer said.

Meanwhile, the Energy Information Administration (EIA) on Thursday reported an 89 Bcf injection into U.S. gas stocks for the week ended Oct. 25, easily surpassing last year’s 49 Bcf injection and the 65 Bcf five-year average. Total working gas in storage ended the period at 3,695 Bcf, 559 Bcf above last year and 52 Bcf above the five-year average, according to EIA.

“Compared to degree days and normal seasonality, the reported injection appears loose by approximately 5.3 Bcf/d versus the prior five-year average,” Genscape Inc. senior natural gas analyst Rick Margolin said of this week’s EIA data. “With one more report to go to close out the summer strip,” Genscape’s daily supply and demand modeling “is currently anticipating the week ending Nov. 1 will show an injection of roughly 57 Bcf.”

Genscape expects the upcoming week’s EIA number to be the last reported injection of the season.

Weekend Discounts

Spot prices fell throughout most of the western two thirds of the Lower 48 Friday, paced by an 18.0-cent drop at benchmark Henry Hub, which averaged $2.495 for weekend and Monday delivery. Forecasts showing more chilly temperatures moving through the Midwest and East regions over the weekend proved insufficient to rally prices given a break in the cold expected early in the upcoming workweek.

“It remains frosty across much of the western and central U.S., with lows” from around zero into the 30s, “although gradually warming” over the weekend, NatGasWeather said Friday. “A reinforcing cold shot will follow across the Midwest and Northeast” over the weekend, “followed by a brief break” early in week ahead. “However, another frigid cold shot will follow” mid-week “over the central and northern U.S., then spreading into the South and East late in the week.”

Temperatures with that cold shot should again range from near-zero to the 30s, driving “very strong demand,” according to the forecaster.

In the Midwest, Chicago Citygate dropped 29.0 cents to $2.280, while in the Northeast, Transco Zone 6 NY climbed 8.5 cents to $1.975. Upstream in Appalachia, Dominion South gained 17.0 cents to $1.900.

Planned maintenance on Columbia Gas Transmission’s (TCO) MXP Line 100 in West Virginia could disrupt up to 1,342 MMcf/d of southbound flows from Tuesday through Friday of the upcoming week, according to Genscape analyst Anthony Ferrara.

“MXP is a relatively new line on TCO that started to flow gas from the first time in January,” Ferrara said. “Due to valve replacements and pigging on the MXP Line 100, the Sherwood B MA42 throughput meter will be reduced to zero total capacity” starting with Tuesday’s (Nov. 5) timely cycle and continuing through the remainder of the maintenance.

“TCO does not anticipate any restriction to the MXPSEG MA42 throughput meter, but they could become necessary based on operating conditions.”

Even with the planned restrictions, production flowing out of Northern West Virginia and Southwestern Pennsylvania should have reroute options, according to the analyst.

“While Sherwood B MA42 is being restricted, gas is still able to flow southbound on the southern portion of MXP as long as TCO does not need to place restrictions on MXPSEG MA42,” Ferrara said.