Absent any clear cold signals to excite a weather-focused natural gas market, futures prices continued on a downward trajectory Tuesday. Coming off a 12.2-cent sell-off a day earlier, the December Nymex contract fell another 5.6 cents to settle at $2.510, near the session’s low of $2.501. January settled at $2.576, down 5.4 cents.

In the spot market, deep discounts in West Texas and the Midcontinent countered gains in the Rockies and New England, leaving NGI’s Spot Gas National Avg. 3.5 cents lower at $2.380.

Given milder temperatures in the latest cycle of forecasts, and with the market trading primarily on the weather outlook at this point in the heating season, INTL FCStone Financial Inc. Senior Vice President Tom Saal said he’s “really not surprised” by recent price action.

“We’re at the beginning of winter. We got cold early, and we didn’t get anywhere near the prices we got last year,” Saal told NGI. Based on Commodity Futures Trading Commission data, speculators are “still pretty short” on natural gas. “They could get shorter. I don’t know if they’re going to press the downside too much right here. Maybe a month from now.

“Technically we’re still in the early stages of winter. The coldest weather is ahead of us based on seasonal averages. There’s still a lot of risk out there in either direction.”

The bears were “firmly in control” Tuesday, according to Bespoke Weather Services. The forecaster viewed both the weather outlook and balances as little changed day/day.

The American dataset actually “moved notably colder” in its midday run Tuesday, “but that model has been so erratic the last few weeks that few seem to take it seriously at this point,” Bespoke said. “Still, other models are not totally conclusive as far as the pattern that will prevail into December, as there remains a battle between a warmer Pacific signal” and North Atlantic Oscillation blocking.

“Obviously, a move more convincingly to the warmer side will send prices even lower very easily, but until we see confirmation of that, it seems risky to press short too strongly here at the $2.50 level.” Even with a “bearish fundamental backdrop...there is still a lot of winter ahead of us, and we have seen that when cold does come, it can tighten the market.”

Last week saw two days of “January-like cold” that provided a “good testing ground” for how the market will react to strong gains in weather-driven demand this winter, according to Energy Aspects.

“However, two cold days in November will not push up gas heating intensity like a more sustained occurrence would have,” the firm said. Contrasting last year’s early winter cold with the recent Arctic blast, November 2018 unsurprisingly “saw a price shift of greater magnitude over a shorter time frame” given that the “overarching concern was deliverability and, by extension, preservation of inventories.

“The overarching concern in November 2019, based on our balances, has been how to contain a ballooning end-October 2020 carryout to a level the market will find acceptable.”

An acceptable end-March inventory level would be around 1.4 Tcf, according to the firm, but getting there “will take significant follow-on cold.” So far, the outlook for December temperatures does not augur well for reaching that 1.4 Tcf target.

“A December that is only marginally colder than normal...would not be enough to knock the market off its current course of plentiful stocks at end-March,” Energy Aspects said. “In fact, for the market to right-size stocks for end-March, December 2019 through March 2020 would need to trend 10% colder than the 10-year temperature average to gain around 480 Bcf in residential/commercial and industrial heating demand.”

Waha Discounts On Pipe Constraints

Spot prices in West Texas, already at a steep discount to Henry Hub, continued to lose ground Tuesday. Waha dropped 30.0 cents to average 64.5 cents.

Constraints on Permian Basin takeaway have coincided with mild weather and continued production growth to pressure prices at hubs like Waha this week, according to Genscape Inc. The firm’s estimated demand for the region as of Tuesday was about 5% below the prior 30-day average, with the impact particularly noticeable in power burns.

“Meanwhile, the return of mild temperatures has enabled the region to recover from any freeze-offs that hit last week,” according to Genscape. “Our estimate of regional production has been running well in excess of 10.6 Bcf/d this week, nearly 0.4 Bcf/d above the 30-day average.”

Permian spot price hubs fell sharply Monday, coinciding with a force majeure on the El Paso Natural Gas (EPNG) system’s Line 1100.

In a notice to shippers Monday, EPNG said it “identified an anomaly” on the line downstream of the El Paso Compressor Station, which is located near the Texas/New Mexico border. EPNG said fixing the issue will require pipe replacement and did not provide a timeline for the repairs.

Genscape analyst Matthew McDowell estimated a 100 MMcf/d reduction through EPNG’s “CORN LPW” throughput meter near Cornudas, TX, as a result of the force majeure.

Also potentially impacting Permian pricing, maintenance scheduled for Wednesday and Thursday was expected to restrict northbound flows out of the Midcontinent on Natural Gas Pipeline Co. of America’s Amarillo mainline.

“A scheduled tool run is set to cut flows to 35% of contracted firm volumes” through the Amarillo line, Genscape’s McDowell said. “This two-day maintenance event could put heavy downward pressure on NGPL Midcontinent spot prices as NGPL Midcontinent Zone gas competes with NGPL’s Permian-sourced molecules for the diminished capacity. NGPL’s downstream demand can be supplied by the Gulf Coast mainline as well as interconnects beyond the affected pipeline segment.”

NGPL Midcontinent day-ahead prices Tuesday indeed appeared hard-hit by the maintenance restriction, tumbling 98.5 cents on average to 61.5 cents.

Farther west, Rockies hubs strengthened across the board Tuesday, including some large day/day gains at locations downstream of the Permian on EPNG and Transwestern. Transwestern San Juan rallied 76.5 cents to $1.960. Prices also picked up at SoCal Border Avg. and El Paso S. Mainline/N. Baja.

“A deep upper-level low over the West will aid in producing heavy mountain snow and heavy lower elevation rain over parts of the Southwest and into parts of the Central/Southern Rockies through Thursday evening,” the National Weather Service (NWS) said. “Tropical moisture from the remnants of Tropical Cyclone Raymond will be transporting northward into the Desert Southwest into the path of a strong closed upper low west of the Baja Peninsula.

“As this frontal system progresses through the Great Basin/Four Corners region, temperatures will drop significantly.”

Daily maximum temperatures in the region were expected to range from 10-20 degrees colder than normal into Thursday, according to the NWS.

On the East Coast, prices generally saw discounts, although New England hubs gained ahead of upcoming pipeline maintenance that could inhibit flows into the region. Algonquin Citygate picked up 76.5 cents to $4.360.

Maintenance scheduled for Thursday and next Wednesday (Nov. 27) is expected to restrict flows through Algonquin Gas Transmission’s Stony Point Compressor Station in New York.

“Since Nov. 12, capacity at Stony Point has increased significantly to 1.85 Bcf/d, but this outage will reduce capacity to 1.43 Bcf/d,” Genscape analyst Josh Garcia said. “...As much as 1.73 Bcf/d has flowed through Stony Point in the last week, signifying a 300 MMcf/d cut in flows.”

Algonquin Citygate prices could see bullish pressure from this event, with near-normal heating degree day totals predicted for New England during both maintenance days, Garcia said.

Upstream in Appalachia, prices sold off Tuesday. Columbia Gas eased 5.5 cents to $2.225.

Pigging planned for Thursday could limit up to 556 MMcf/d of westbound flows on Columbia Gas Transmission (TCO), according to Genscape analyst Anthony Ferrara. TCO has scheduled the pigging on its “Line LEX” between the Summerfield Compressor Station and Rockbridge Regulator Station.

“LXPSEG MA41, a throughput meter located in Ohio that moves gas westbound on Line LEX, will be limited to 728 MMcf/d on gas day Thursday (Nov. 21) for this event,” Ferrara said. “So far this month, LXPSEG MA41 has averaged 1,119 MMcf/d and maxed at 1,284 MMcf/d.”