With forecasts over the weekend expected to offer potentially pivotal insight into temperature trends later this month, natural gas futures prices failed to chart a definitive move in either direction Friday. The December Nymex contract traded both sides of even on the way to settling at $2.789/MMBtu, 1.7 cents higher on the day. January added 1.4 cents to $2.873.
In the spot market, calls for a brief warm-up over the weekend inspired deep discounts in the Northeast, sending NGI’s Spot Gas National Avg. 19.5 cents lower to $2.560.
The midday Global Forecast System (GFS) data came in “notably milder trending” Friday, dropping 18 heating degree days (HDD) from the outlook compared to 24 hours earlier, according to NatGasWeather. The latest European data added “several HDDs” but advertised a milder outlook for days 11-15 of the forecast period.
“The pattern is such that there could be colder trends over the weekend for Nov. 18-23,” a factor potentially aiding in Friday’s price gains, NatGasWeather said. “...There are big risks again holding this weekend as there’s likely to be a gap in prices depending on temperature trends for Nov. 18-25. The GFS might have lost a little too much demand this run, but if it didn’t, or if it were to trend further milder, a gap lower should be expected.”
Meanwhile, the Energy Information Administration (EIA) reported a 34 Bcf weekly injection into U.S. natural gas stocks Thursday, about 10 Bcf below consensus and lower than both the 63 Bcf year-ago injection and the 57 Bcf five-year average. Total Lower 48 working gas in underground storage stood at 3,729 Bcf as of Nov. 1, 530 Bcf (16.6%) above year-ago stocks and 29 Bcf (0.8%) higher than the five-year average, according to EIA.
In terms of balances, “degree days continue to do yeoman’s work, coming in 29% above normal” for the most recent report week and averaging 19% above normal over the past five weeks, according to analysts at Tudor, Pickering, Holt & Co. (TPH).
“On a weather-adjusted basis, the injection implies a 1 Bcf/d oversupplied market, a stark improvement from recent weeks in the 3-4 Bcf/d oversupply range, but we expect things to loosen next week” on an uptick in supply from domestic production and Canadian imports, along with a dropoff in liquefied natural gas feed gas demand, the TPH team said.
Even with early-season cold, the market may have to wait to see its first weekly withdrawal, with TPH’s estimates suggesting a 10 Bcf build for next week’s EIA report.
“On a regional basis, the Pacific and Mountain regions posted draws last week, and storage in these regions sits at 73% and 79% of capacity, respectively,” the TPH analysts said. “On the other hand, East storage added another 19 Bcf and is at 95% of capacity, the highest since 2012.”
Genscape Inc. counted the 34 Bcf build as roughly 3.3 Bcf/d loose versus the prior five-year average when compared to degree days and normal seasonality.
“Colder weather is showing up in a big way, which should bring much tighter weekly storage stats due to growth in residential/commercial demand-per-degree-day over the past few years as well as production freeze-offs that, generally, occur when temperatures drop into the 20 degrees range in production areas,” Genscape senior natural gas analyst Eric Fell said.
“The market tightening comes in the wake of notable looseness the last nine weeks, during which injections averaged 3.7 Bcf/d loose on a weather-adjusted basis,” he added. “Over the last nine weeks, we have injected 112 Bcf more than the five-year average despite 75 more degree days than the five-year average over that period.”
The last nine weeks of plump builds represents a continuation of a trend that spans the entire injection season. In fact, the United States injected a near-record amount of natural gas during the April 1-Oct. 31 period, according to EIA.
The pace of injections enabled inventories to rebound from a relatively low 1,155 Bcf at the start of April to an end-October carryout of 3,724 Bcf, the agency said in a research note Friday.
“From April 1 through Oct. 31, more than 2,569 Bcf of natural gas was placed into storage in the Lower 48 states,” EIA said. “This volume was the second-highest net injected volume for the injection season, falling short of the record 2,727 Bcf injected during the 2014 injection season.”
That record-setting year followed an unusually cold winter that depleted Lower 48 inventories to just 837 Bcf, the lowest level for that time of year since 2003, EIA noted.
Forecasts calling for a short reprieve from early-season chills in the Midwest and Northeast accompanied discounts on deals for weekend and Monday delivery in those regions.
In the Midwest, Joliet slid 9.0 cents to $2.685.
In the Northeast, New England hubs gave back cold-driven premiums added during the previous session, with Algonquin Citygate shedding $2.165 to average $3.045.
A cold front was expected to exit the East on Friday, leaving chilly temperatures behind, including lows from the single digits to the 30s across much of the Lower 48 aside from the Southwest, according to NatGasWeather.
The forecaster called for the Midwest, Ohio Valley and Northeast to see a “brief break” in the cold temperatures late in the weekend, with highs climbing into the 40s and 50s, resulting in lighter demand.
“However, a frigid Arctic blast remains on track to arrive” during the upcoming week, impacting areas “east of the Rockies with very cold air and lows” ranging from below zero to the 30s, including lows in the teens to 30s for Texas and the southern United States, NatGasWeather said. “A second cold shot will follow across the Northeast” late in the week ahead. “The West will be mild to warm due to high pressure.”
Appalachian hubs also saw discounts ahead of the weekend, including at Texas Eastern M-3, Delivery, which sold off 61.0 cents to $2.290.
Texas Eastern Transmission (aka Tetco) experienced an unplanned outage at its Lilly Compressor Station in Lilly, PA, Thursday, restricting maximum capacity through the station until further notice.
Genscape analyst Josh Garcia said the restriction dropped capacity by 146 MMcf/d to 2.35 MMcf/d, impacting volumes on the Penn-Jersey Line in Tetco’s M-3 zone.
“Flows were not curtailed, but capacity at Lilly is now 96.3% utilized,” Garcia said. “Remediation should not take long, but this adds bullish pressure to M-3 prices” given cold weather expected for the region.
Meanwhile, on the West Coast, the impending start of new import restrictions into the Southern California Gas (SoCalGas) system exerted minimal upward pressure on spot prices in the region heading into the weekend.
SoCalGas was scheduled to begin maintenance impacting about 150 MMcf/d of imports on its Southern Zone for a five-day period, according to Genscape analyst Joseph Bernardi.
“Relocation work on SoCalGas’s L2000 will take the Southern Zone’s operational import capacity from 758 MMcf/d to 607 MMcf/d through Wednesday (Nov. 13),” Bernardi said. “Flows typically hover around the firm operating capacity level, occasionally exceeding it by as much as 130 MMcf/d depending on the strength of local demand between the California/Arizona border and the coastal demand areas.”
The SoCalGas Southern Zone includes interconnects with El Paso Natural Gas and North Baja, as well as with Transportadora de Gas Natural de Baja California (aka TGN) at Otay Mesa near the California/Mexico border, Bernardi said.
Genscape meteorologists were expecting mostly mild weather for the region over the weekend and early in the upcoming work week.
“Demand numbers and SoCal Citygate basis prices have been elevated over the last two weeks, cresting about a week ago in conjunction with the first round of heating demand load,” Bernardi said. “For this event, with temperatures back on the rise and demand set to decrease, some upward basis price pressure may result but looks to remain muted.”