Colder trends in the outlook for later this month into early December helped natural gas futures snap a two-day losing streak Wednesday. Bouncing back partially from heavy selling during Monday’s and Tuesday’s sessions, the December Nymex contract added 4.9 cents to settle at $2.559/MMBtu. January settled at $2.611, up 3.5 cents.
In the spot market, gains throughout the Rockies, California and the Desert Southwest lifted NGI’s Spot Gas National Avg. 7.5 cents to $2.455.
After weather data had trended colder overnight ahead of Wednesday’s session, the midday Global Forecast System (GFS) data maintained a “chilly” setup across the northern United States for the Nov. 28-Dec. 3 period, according to NatGasWeather.
The GFS “lost a little demand the next seven days but gained an equivalent amount on the back end, offsetting,” the forecaster said. “Where the data has been colder trending is late next week through the first several days of December by favoring weather systems tracking out of the west-central United States more aggressively into the East.”
As of Wednesday afternoon, the European model had picked up around 7-8 heating degree days versus its run 24 hours earlier, NatGasWeather said.
“It’s not a huge amount, but it’s better compared to what it showed at the start of the week,” the forecaster said, adding that upcoming model runs could prove important in determining whether or not “colder trends the past few days for the start of December stick.”
Meanwhile, this week’s Energy Information Administration (EIA) storage report is set to officially kick off the withdrawal season in style, according to estimates. Predictions for Thursday’s report, covering the week ended Nov. 15, have been pointing to a much larger-than-average withdrawal in the upper 80s Bcf.
A Bloomberg survey as of Wednesday afternoon showed a median prediction for an 88 Bcf pull, with estimated withdrawals ranging from 82 Bcf to 99 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled Tuesday at minus 87 Bcf. NGI’s model predicted a 101 Bcf withdrawal.
Last year, EIA recorded a 109 Bcf pull for the period, and the five-year average is a withdrawal of 32 Bcf.
It will likely take “substantially colder forecasts” to offset the downward price pressure exerted by an increasing year/year storage surplus and “bearish fundamentals,” according to analysts at EBW Analytics Group.
Nearer term, however, “natural gas declines may pause temporarily as shorts encounter technical support.” Meanwhile, Thursday’s EIA report could reveal a “bullish” withdrawal, the EBW analysts said. Also a potential factor in upcoming price action is “contract rollover, a long Thanksgiving holiday weekend and weather model inconsistency heightening risks of a bullish forecast shift.”
Spot prices strengthened throughout markets in the Western United States Wednesday as short-range forecasts called for a chilly weather system to bring rain and snow into the region.
The National Weather Service (NWS) called for “heavy mountain snow and moderate to heavy rain in lower elevations” in the Southwest over the next few days, associated with a “deep upper-level low” expected to move eastward across the region.
“The precipitation shield will shift into the Southern/Central Rockies/High Plains as the front approaches,” the NWS said.
NatGasWeather predicted moderate demand impacts from the weather system hitting the Western United States, with “only slightly cool” temperatures expected, including highs in the 30s to 50s.
In California, Malin tacked on 48.5 cents to $3.135, while SoCal Citygate recorded big gains for a third straight day, picking up 60.0 cents to average $5.930. That’s up nearly $2 compared to average prices there late last week.
The elevated prices at SoCal Citygate this week have occurred on a combination of storage maintenance and colder weather in the forecast, according to Genscape Inc. analyst Joe Bernardi.
Spot basis at SoCal Citygate has reached levels not seen since early March, but recent demand has been “comparatively lackluster,” Bernardi said. “Instead of the roughly 3 Bcf/d levels” recorded in early March, “demand has only reached up into the 2.4-2.65 Bcf/d range over the past several days.
“Genscape meteorologists are forecasting sustained colder-than-normal temperatures for Southern California over the next week and a half. In addition, the pipe is performing a planned high inventory shut-in at the Honor Rancho storage field, limiting withdrawals.” That planned shut-in started last Friday (Nov. 15) and is expected to last through Nov. 27, according to the analyst.
Meanwhile, planned maintenance on the Mojave Pipeline could cut about 224 MMcf/d of imports into California from Nevada, according to Genscape analyst Matthew McDowell.
Another potential factor for spot prices in the region, maintenance on Pacific Gas & Electric (PG&E) recently disrupted flows into Southern California Gas (aka SoCalGas).
According to Bernardi, “PG&E’s receipts from El Paso Natural Gas and Transwestern dropped as expected, but deliveries to SoCalGas remained in line with recent norms thanks to an increase in PG&E’s storage withdrawals.”
Farther north in the Golden State, PG&E on Wednesday said it began another Public Safety Power Shutoff event, initially impacting around 150,000 customers in parts of 18 counties due to forecasts for strong winds and dry conditions. PG&E subsequently announced that “improved weather” reduced the scope of the shutoffs, with power turned off for around 48,000 customers.
Announced earlier this week, the shutoffs reflect the liability-laden utility’s latest efforts to proactively mitigate the wildfire risk posed by its electric infrastructure.
The NWS warned of a “critical risk of fire weather” for portions of Northern and Central California through Thursday.
Meanwhile, prices were generally steady across much of Texas, Louisiana, the Southeast and the Midwest as NatGasWeather was calling for “light national demand through Thursday,” including generally “mild to warm” temperatures for much of the eastern two-thirds of the Lower 48.
Henry Hub finished the day unchanged at $2.465. In the Northeast, prices posted heavier losses, including at several New England hubs that had added premiums earlier in the week. Tenn Zone 6 200L tumbled $1.130 to average $3.215.
Genscape was forecasting New England demand of just over 3.15 Bcf/d to close out the work week, down slightly from the recent seven-day average of 3.37 Bcf/d.