With residents throughout the middle of the country sporting tank tops and flip-flops, the lack of significant heating demand sent natural gas prices for Dec. 2-6 considerably lower. West Texas and the Northeast were some of the only bright spots in the United States, with NGI’s Weekly Spot Gas National Avg. falling 11.0 cents to $2.315.
In the Northeast, sharp week/week increases were seen as an Alberta clipper system moved throughout the region midweek, keeping a lid on daytime temperatures. Afternoon highs reached only the 20s and 30s, about 5 to 10 degrees below normal, according to AccuWeather.
Despite the chilly weather, Appalachia prices were down almost across the board. Columbia Gas lost 21.5 cents week/week to average $1.895. Texas Eastern M-3, Delivery, however, climbed 7.5 cents to $2.355 amid ongoing maintenance along the pipeline.
Losses across the Southeast were capped at less than a dime, while Louisiana prices were down as much as 15 cents. Henry Hub fell 8.5 cents week/week to average $2.310.
West Coast markets posted some of the most substantial decreases for the week despite some wintry weather earlier in the week. In the Rockies, Northwest Sumas plunged $2.795 week/week to average just $2.80.
The swift fall for Sumas prices comes as Enbridge Inc. boosted southbound flows on its Westcoast Transmission system following satisfactorily completed engineering assessments following the October 2018 explosion and force majeure. Jackson Prairie Storage inventories have also recovered after an early drawdown, now sitting within 2% of the five-year average, according to Genscape Inc.
Despite upward momentum that had built early in the week, Nymex natural gas futures closed Friday in the red as weather models that had been greatly at odds finally converged, with the much colder model finally giving in and erasing much of the demand from its outlook.
The January Nymex gas futures contract settled Friday at $2.334, down 9.3 cents day/day. February slipped 7.9 cents to $2.319.
Earlier in the week, however, both contracts had traded near or above $2.50 as the Global Ensemble Forecast System weather model had shifted considerably colder. The European data also trended chillier, but to a far lesser degree that resulted in the models having nearly 40 gas-weighted degree days between them.
The wide discrepancy between the models kept the market on edge, with Tuesday bringing about the largest single-day increase of the week as the January contract catapulted more than 11 cents and the February contract shot up nearly 10 cents.
On Thursday, with weather data still at odds, all eyes were on the latest government storage data. The U.S. Energy Information Administration (EIA) reported a 19 Bcf withdrawal from storage inventories for the week ending Nov. 29.
The print easily came in within the range of projections but was still far below historical levels. The EIA recorded a 62 Bcf withdrawal in the same week last year, and the five-year average stands at 42 Bcf.
Broken down by region, the Midwest reported the largest withdrawal of 12 Bcf, while the Pacific pulled 7 Bcf out of storage, according to EIA. Just 4 Bcf was drawn out of inventories in the Mountain region, and the East pulled out 3 Bcf.
The South Central region posted a net injection of 8 Bcf, including 13 Bcf that was added into salt facilities and 5 Bcf that was withdrawn from nonsalts, the EIA said.
Excluding weather-related demand, Thursday’s injection implies that market demand was 1.29 Bcf/d looser versus the same week last year and has averaged 0.03 Bcf/d looser over the past four weeks, according to Raymond James & Associates.
Nevertheless, futures prices jumped several cents after the latest EIA data was released, but then eased a bit ahead of the close. January ultimately ended the day less than 3 cents higher day/day.
Early Friday, weather models offered a mixed message of sorts. One reason was because they remained starkly at odds. The other reason was that both models had slightly higher forecast demand totals, but both also showed a pattern at the end of the 11- to 15-day outlook that is less favorable for cold.
Weather forecasters knew one of the models was wrong.
Bespoke Weather Services continued to lean more toward the European data, but said the pattern could migrate toward a more favorable look for cold toward the very end of the month. NatGasWeather, frustrated at the lack of convergence throughout the week, hoped the issue was resolved before the weekend break, “or we must expect there will be a substantial price to pay for players who are on the wrong side of weather forecasts/trends at the Sunday reopen.”
Alas, Friday’s midday run of the Global Forecast System finally conceded it had been much too cold and lost a hefty 30 heating degree days (HDD). It still advertises a strong cold shot into the northern United States during the middle part of next week, but locked onto a milder break for Dec. 13-15 and also wasn't as cold across the northern United States Dec. 17-20.
“It's still chilly Dec. 17-19 with above normal HDDs, just not nearly as ominous,” NatGasWeather said.
Then, the Friday afternoon run of the European data held onto its milder stance, leading to the eventual decline of nearly 10 cents at the front of the curve. When the smoke cleared, the January Nymex contract closed Friday just a half-cent higher than Monday’s close. February’s $2.319 settle was up about a penny from the top of the week.
The core of the winter season is still weeks away, but downright tropical weather conditions expected across much of the United States sent spot gas prices lower on Friday.
Some of the most significant losses were in the Northeast, where Mother Nature was expected to unload everything but the kitchen sink over the next several days. A surge of warm air was forecast to hit the region beginning over the weekend, lifting daytime highs into the 50s, but by Wednesday, a rapid freeze-up in expected, according to AccuWeather.
“Since the storm will be weak rather than strong, it's possible that a secondary storm may develop along the push of frigid air,” AccuWeather chief broadcast meteorologist Bernie Rayno said. “I am pretty convinced that a storm is going to form along this boundary, between warmer air in place and colder air surging, into the Carolinas Tuesday night.”
The question then becomes whether the storm goes out to sea and takes the cold front blasts along with it, or does the storm have enough strength because of all of the energy associated with the jet stream that the storm strengthens?
“If it does, it won’t go out to sea. It will come up the coast. If the storm does strengthen, you’ve got to worry about a snowstorm,” Rayno said.
With several days of mild temperatures until then, Northeast spot gas prices crashed by the double-digits. Tenn Zone 6 200L tumbled 15.5 cents to $4.340. Transco Zone 6 non-NY plunged 24.5 cents to $2.125.
Losses across Appalachia were similarly stout, with Tennessee Zone 4 Marcellus giving up 24.0 cents to average $1.610.
On the pipeline front, Texas Eastern Transmission (Tetco) from Saturday (Dec. 7) through Dec. 14 plans to conduct an outage on its Somerset, OH, compressor station on the 24-inch diameter line. Capacity from Sarahsville to Lebanon would be reduced by 117 MMcf/d, but flows will be curtailed by as much as around 190 MMcf/d based on 30-day max flows through the line, according to Genscape Inc.
“This line has been subject to several rounds of maintenance over the last few months,” Genscape Inc. analyst Josh Garcia said. “With the 30-inch line and the Penn-Jersey Line also currently going through outages, three out of four of M2’s export lines are constrained (counting the Northern and Southern M3 lines as separate lines), which adds more bearish pressure on M2 prices.”
Interestingly, it was Texas Eastern M-3, Delivery that posted much stronger decreases as spot gas tumbled 35.5 cents to $2.085.
Cash prices across the country’s midsection were down as much as a dime, including much of Texas. The exception was in the western part of the state, where El Paso Permian cash tumbled 20.5 cents to $1.290. Other pricing hubs in the region put up similar declines.
After posting some of the largest day/day moves throughout the week, most western pricing hubs saw more muted action on Friday. Opal was down only 4.0 cents to $2.625, while Malin rose a half-cent to $2.700.
The more volatile SoCal Citygate, however, plunged 53.5 cents to $4.270, though it remained one of the highest-priced hubs in the country outside of the Northeast.