- February Nymex futures off 2.0 cents to $2.182/MMBtu; March down 1.0 cent to $2.158
- “We struggle to find reasons to sell here, as midday model runs still show consistency on a new pattern,” says Bespoke
- “Looking forward, rallies will need to break above the $2.258-2.297 range to force the large short interest to start covering positions”: Enverus
- West Texas prices rally, although NGPL restricting northbound flows
Apparently not impressed by forecasts showing a shift to colder temperatures starting next week, natural gas traders sent futures prices a few pennies lower Monday. After trading as high as $2.226/MMBtu and as low as $2.163, the February Nymex contract settled at $2.182, off 2.0 cents. March slid 1.0 cent to $2.158.
In the spot market, price action was mixed, but strong gains in the Northeast coming out of the weekend helped send NGI’s Spot Gas National Avg. 4.0 cents higher to $2.010.
Despite some volatility in recent model runs, the latest weather data Monday remained consistent in showing a return to “at least” near-normal demand starting early next week, according to Bespoke Weather Services.
“That did not stop sellers from stepping in” Monday, “although the curve did improve throughout the day...and prompt month prices closed a couple of cents off their lows,” Bespoke said. “...We struggle to find reasons to sell here, as midday model runs still show consistency on a new pattern, and the background fundamental picture, if anything, has improved some in our data.”
With models showing a step-change higher in heating demand by next week, the question remains how and when the market might respond, according to EBW Analytics Group analysts.
“The timing, magnitude and duration of any move up remains to be seen,” they said. “Extreme warm weather is expected to continue for several more days, restraining cash prices -- and near-term weather has been trending warmer than predicted all winter.
“If the weather pattern shift occurs this coming weekend, as currently predicted, demand for natural gas could jump by more than 20 Bcf/d and remain elevated for three to three and a half weeks, pushing prices higher.”
Meanwhile, recent data from the Commodity Futures Trading Commission (CFTC) offers a few hints of bullish sentiment increasing among speculative traders, according to analysts at Enverus.
CFTC data showing positions as of Dec. 31 “had an increase of just 632 contracts in the managed money short position, while the managed money long position increased by 4,759 contracts,” the Enverus analysts said. “The following report, released last Friday with positions as of Jan. 7, showed the short sector rebounding with an increase of 24,673 contracts.
“Interestingly, the managed money long position was also more active with an increase of 15,295 contracts, suggesting that a base may be building for the speculative bulls.”
From a technical standpoint, the front month encountered “significant buying” last week when it probed below $2.10, according to the Enverus team.
“Prices have not been able to break below this area and challenge the August low of $2.029, regardless of the bearish fundamental data,” the analysts said. “Looking forward, rallies will need to break above the $2.258-2.297 range to force the large short interest to start covering positions. As for the shorts, they will need a flip in forecasts to find the strength to challenge the lows from August, as the last three attempts have fallen short of the breakdown.”
AGT Unplanned Outage
Despite exceptionally mild conditions spread across the eastern half of the Lower 48 this week, most Northeast hubs posted double-digit gains coming out of the weekend. However, the sub-$2.50 regional average Monday showed prices sitting well off the typical winter highs. Algonquin Citygate jumped 51.0 cents to $2.375.
Potentially adding some upward pressure on prices in the region, Algonquin Gas Transmission declared a force majeure over the weekend from an unplanned outage at its compressor station in Burrillville, RI.
“Operational capacity fell 158 MMcf/d from 1,086 MMcf/d to 928 MMcf/d, but flows have not exceeded this operational capacity since Dec. 20,” Genscape Inc. analyst Josh Garcia said.
Meanwhile, in the western United States, a number of locations continued to trade at a premium to Henry Hub, although day/day adjustments were mixed Monday. Northwest Sumas eased 36.5 cents to $2.715, while Kern River picked up 5.5 cents to $2.625.
The National Weather Service (NWS) in its short-range forecast Monday was calling for mild conditions over the eastern United States but “bitterly cold” temperatures over the Northern Rockies and Plains, part of an “active stretch of weather” over the Northwest.
“Wintry weather is the headliner, with numerous winter storm warnings and winter weather advisories in effect from the Cascades of Washington and Oregon eastward to the Central Rockies,” the forecaster said. “Snowfall will be measured in feet in the Cascades, the Northern Sierra Nevada, North-Central Utah and the Colorado Rockies. Winter storm watches have also been issued for the Seattle metro area as they may pick up a few inches of snow.”
A far cry from the wintry conditions out West, the forecast for the Southeast was showing exceedingly warm conditions to start the work week.
“Unseasonably mild temperatures will continue across the southeastern U.S.” following a “big weekend storm system,” the NWS said. “Record warm daily high and low temperatures will be possible in parts of the Southeast through Wednesday. Temperature anomalies on average will range between 10-20 degrees above normal across much of the Mid-Atlantic/Southeast and into the Central Appalachians.”
Numerous Gulf Coast and Southeast hubs finished within a nickel of even to remain near or below the $2 mark Monday. Katy slid half a cent to $1.980, while Transco Zone 4 picked up 2.0 cents to $2.010.
The recent run of unseasonable warmth has put this month on track to become the warmest January on record for at least a decade, according to Genscape.
Population-weighted net degree days (DD) month-to-date are averaging about 3 DD warmer than January 2017, the previous warmest January over that same time frame, the firm said. That’s also about 6.6 DD warmer than the 10-year month-to-date average.
“While there is a cold system bearing down on the West Coast, the more densely populated demand markets to the east of the Mississippi and along the Gulf Coast are projected to continue experiencing mild weather conditions in the week ahead,” Genscape senior natural gas analyst Rick Margolin said.
A force majeure declared late last week on the Natural Gas Pipeline Co. of America (NGPL) system could impact around 100 MMcf/d of volumes flowing out the Permian Basin, according to Genscape analyst Matthew McDowell.
NGPL said in a notice to shippers it discovered “mechanical issues” at its Compressor Station (CS) 102 in its Midcontinent Zone, requiring it to temporarily reduce northbound capacity through CS 102 and CS 103. NGPL said it expected the restriction -- 75% of maximum daily quantity through CS 103 in Ford County, KS -- to last through Wednesday.
“The pipe has experienced issues at its Compressor Station 102 in the Oklahoma Panhandle for the fourth time in the last year,” McDowell said. “...The most recent event at this compressor, which lasted seven days, featured a similar capacity reduction. Flow through ‘STA 103 FORD’ has averaged 901 MMcf/d in the last 30 days prior to this force majeure,” and nominations data suggests the restriction could impact 98 MMcf/d.