- December Nymex futures up 10.7 cents to $2.821; January up 9.6 cents to $2.898
- Waha slides as NGPL maintenance leads to competition between Permian, Midcon production: Genscape
- “Upper level ridging is reluctant so far to move away from the west coast of North America up toward Alaska, which keeps a downstream colder trough in places in the eastern half” of the U.S., says Bespoke
- “Expect additional volatility this week with short covering, depending on how the weather forecasts play out”: Enverus
Further cold trends from the latest guidance kept the fire burning for natural gas futures prices Monday, extending last week’s gains for a market focused on early-season weather signals. The December Nymex contract settled 10.7 cents higher at $2.821/MMBtu after probing as high as $2.842. January picked up 9.6 cents to settle at $2.898, while February settled 8.7 cents higher at $2.849.
In the spot market, a combination of cold temperatures pouring into the heart of the Lower 48 and pipeline maintenance impacting production helped rally NGI’s Spot Gas National Avg. 21.5 cents to $2.405.
The 15-day forecast came in “much colder” Monday than what guidance had advertised late last week, Bespoke Weather Services said.
“Upper level ridging is reluctant so far to move away from the west coast of North America up toward Alaska, which keeps a downstream colder trough in places in the eastern half of the nation,” the forecaster said. “Until the west coast ridge fades, we are at risk for additional colder changes.
“We do still believe the pattern will break, which at this point likely seems like nothing more than an exercise in stubbornness, but we still maintain that we do not see support for the cold pattern to extend all the way into December.”
The cold pattern is sticking around longer than previously expected, and is “remarkably mimicking what we saw a year ago, but keep in mind that pattern also finally flipped warmer once into December,” Bespoke said.
The latest cold trends have opened up the possibility that this November could prove “nearly as cold” as November 2018, according to analysts at EBW Analytics Group.
“With a huge net short speculative position still outstanding, the December contract could test resistance at $2.92 early this week, and potentially rise further if the cold trend continues,” the EBW analysts said. “Natural gas is already overextended and will reverse course once signs emerge that the cold weather will break. For now, though, the rally is likely to continue.”
Analysts at Enverus said updated Commodity Futures Trading Commission (CFTC) data, reflecting trading activity as of last Tuesday, points to the “initial stages of a short covering process” as the market reacted to forecasts showing higher residential/commercial demand. The CFTC data showed the managed money short position shrinking by 21,951 contracts week/week as the managed money long position increased by 12,085 contracts, according to Enverus.
“Rallies based solely on short covering are historically short in duration,” the Enverus analysts said. “If the market is to maintain a longer-term bullish bias into the winter season, it will need to be based on gains in total open interest, offsetting the short covering losses.”
Last week’s trading saw prices break through several areas of resistance, and a daily close above the $2.71 intraday high recorded for the front month back in September opens up the potential for further short covering among speculators, according to Enverus.
“Expect additional volatility this week with short covering, depending on how the weather forecasts play out,” the analysts said. “Momentum indicators are becoming overbought, but that will not dramatically affect short covering. Additional gains may take prices to the February and March highs between $2.824 and $2.908. A reversal in the forecasts and adjustments to demand will pressure prices down to a key area around $2.50.”
Meanwhile, planned maintenance this week on Natural Gas Pipeline Co. of America (NGPL), expected to start Tuesday and continue through Wednesday’s gas day, could impact deliveries to the Corpus Christi liquefied natural gas (LNG) terminal, according to Genscape Inc.
The event is expected to limit deliveries from NGPL’s Sinton meter into the Corpus Christi Pipeline (CCPL) to zero, Genscape analyst Allison Hurley told clients in a note Monday.
“Deliveries from NGPL’s Sinton meter onto CCPL have averaged 355 MMcf/d over the last 14 days,” Hurley said. “If the shut-in of NGPL Sinton deliveries to CCPL is not displaced by an increase in deliveries from one or more of the other connecting pipelines, then we can expect at least a partial train shutdown at Corpus Christi LNG.”
A chilly forecast combined with upstream disruptions to send Midwest prices soaring to start the week. Most regional hubs gained around 35-40 cents day/day, including Dawn, which climbed 39.0 cents to average $2.665.
The National Weather Service was calling for a front carrying colder air to move out of Central Canada into the Upper Great Lakes Monday evening before reaching the Lower Great Lakes by Tuesday evening.
“As high pressure over Northwestern Canada builds southeastward on Monday evening, upslope flow will aid in producing scattered snow showers over parts of the Northern High Plains that will slowly expand eastward to the Northern Plains and the Upper Mississippi Valley/Upper Great Lakes on Tuesday evening into Wednesday,” the forecaster said.
Maxar’s Weather Desk predicted much to strongly below normal temperatures for Midwest population centers later in the week, including lows down into the 20s in Chicago by Thursday and Friday. The forecaster called for lows in Minneapolis to drop down to the low 20s Tuesday before falling into the teens by the end of the workweek.
Further upstream, a number of Appalachian hubs saw steep discounts as pipeline maintenance looked to be restricting production volumes bound for Midwest markets.
A major maintenance event on Nexus Gas Transmission, expected to cut up to 1.2 Bcf/d of northbound flows amid an outage through the pipeline’s Wadsworth station in Ohio, is set to begin Tuesday and continue through next Monday, according to Genscape.
Nexus has been receiving most of its supply from Texas Eastern Transmission (Tetco), “whether from leased capacity or pure deliveries from Tetco,” Genscape analyst Anthony Ferrara said. “This outage will prevent all that gas from flowing onto Nexus, which could be bearish” for Tetco M-2 prices. “Furthermore, without Nexus able to flow gas northbound to Michigan and Canada, there could be bullish pressure on demand hubs in the Midwest.”
However, a storage cushion at Dawn could limit upward price pressure there, the analyst said.
Elsewhere in the region, from Tuesday through Friday planned maintenance on the Rockies Express Pipeline (REX) could limit as much as 332 MMcf/d flowing west on the line through Ohio, Ferrara said.
In a notice, REX said it will be performing maintenance at its Chandlersville Compressor Station, impacting some shipper activity at the Clarington Hub Pool Point and limiting capacity through the pipeline’s Segment 380.
Segment 380 flows will be limited to 2,519 MMcf/d for Tuesday through Thursday, with capacity increasing to 2,741 MMcf/d for Friday, according to Ferrara.
“Over the past 30 days, flows through Segment 380 have averaged 2,778 MMcf/d and maxed at 2,851 MMcf/d,” the analyst said. “Based off these historical values, we could see flow cuts of up to 332 MMcf/d Tuesday through Thursday but potential cuts of only up to 110 MMcf/d on Friday.”
Elsewhere, maintenance is also scheduled this week at NGPL’s Compressor Station 801 in Oklahoma, with the work restricting flows through the station until next Monday.
“This event effectively separates the East and West halves of NGPL and will force some amount of reroutes for NGPL’s Midcontinent production points that do not have alternative paths,” Genscape analyst Matthew McDowell said. “In past events, this has prompted competition between NGPL Midcontinent and Permian spot markets as molecules compete for limited capacity toward NGPL’s Market Delivery Zone.”
Over in the Gulf Coast and Southeast, most locations gained around a quarter or so, paced by a 24.5-cent increase at Henry Hub.
Southeast Supply Header (SESH) declared a force majeure over the weekend as a mechanical failure forced the pipeline to remove a compressor unit from service at its Delhi Compressor Station in Louisiana. SESH notified shippers of mainline capacity reductions through Delhi, as well as the Gwinville and Lucedale compressor stations, with the outage expected to last around two weeks.
“Flows have fallen by as much as 171 MMcf/d compared to the 30-day average and 243 MMcf/d compared to the 30-day max,” Genscape analyst Josh Garcia said. Southern Natural Gas also notified shippers of the SESH force majeure “due to limitations in receipts from its interconnect with SESH.”