The Feb. 17-21 period was a volatile one for spot natural gas prices as some of the coldest weather of the season drove up demand in premium markets. However, a dramatic move lower later in the period left weekly prices only slightly higher week/week. NGI’s Weekly Spot Gas National Avg. climbed 7.0 cents to $1.820.
That’s not to say there weren’t some big movers. With temperatures plunging well below normal, even by winter standards, demand was strong across the Northeast. Transco Zone 6 NY prices shot up 18.0 cents week/week to average $2.120.
Prices in New England soared as high as $3.50, but some market hubs ended the week lower; Tenn Zone 6 200L weekly prices fell 4.5 cents week/week to $2.475.
Southeast prices were anywhere from 12-22 cents higher on the week, while similar gains were seen in Louisiana.
In the Midwest, Chicago Citygate climbed 8.0 cents on the week to $1.835.
A massive sell-off in the Permian Basin sent prices crashing back below zero at Waha, but the West Texas hub managed to post a 37.0-cent average for the week after tumbling some 30.5 cents.
Some of that decline occurred as Natural Gas PipeLine Co. of America ended a six-month-long force majeure that had been restricting the Indian Basin lateral of its Permian takeaway line to zero flow. The issue had constrained about 50 MMcf/d of Permian takeaway and was the result of an unexplained failure near its compressor station 167 in Eddy County, NM, according to Genscape Inc. The line required hydrostatic testing and environmental permitting in addition to “regulatory approval” according to notices issued during the event, Genscape analyst Matthew McDowell said.
Futures Improve, Downside Risk Seen
Natural gas futures ended the week in much better shape than they had been just a week prior as a major change in long-range weather forecasts catapulted prices higher to start the short work week. Although weather models have warmed considerably since then, futures managed to hold onto much of the gains.
The March Nymex gas contract settled Friday at $1.905, down 7.6 cents from Tuesday but still 6.8 cents above Feb. 14’s close. April fell 5.4 cents from Tuesday to $1.917, but sat 6.1 cents above the Feb. 14 settlement.
The latest weather forecasts have shown “big bearish trends” in recent runs, with cold not as impressive Feb. 27-March 2 and then with a milder U.S. pattern favored to return March 3-6, according to NatGasWeather. It’s this March 3-6 period where cold doesn’t look to be sustained, the firm said.
“The balance is certainly proving to be quite tight” with Thursday’s Energy Information Administration (EIA) report again printing to the bullish side of expectations, NatGasWeather said. The larger-than-expected 151 Bcf withdrawal for the week ending Feb. 14 compared with last year’s 136 Bcf pull and the 163 Bcf five-year average, according to EIA.
Broken down by region, the Midwest led the nation with a 55 Bcf draw from storage thanks to strong power burns amid near-record low temperatures during the reporting week. The East pulled 42 Bcf out of storage, as did the South Central region, including a 29 Bcf draw from nonsalt facilities and a 12 Bcf draw from salts. The Mountain and Pacific regions each withdrew less than 10 Bcf, EIA data showed.
Working gas in storage stood at 2,343 Bcf, 613 Bcf above last year and 200 Bcf above the five-year average, EIA said.
Compared to degree days and normal seasonality, this week’s EIA figure appears tight/bullish by about 2.9 Bcf/d versus the five-year average, with this week’s draw coming in larger than the five-year average while degree days totals were roughly 11 below the five-year average, according to Genscape Inc.
Those tighter balances partially are being driven by higher demand for liquefied natural gas (LNG). Year-to-date feed gas demand has averaged 8.5 Bcf/d, more than doubling the 2019 year-to-date total of 4.2 Bcf/d, according to EBW Analytics Group. “Clearly, the 4.3 Bcf/d of core year/year demand growth has been critical in balancing an oversupplied market.”
As demand has faltered over the past week due to maintenance at the Sabine Pass and Cameron terminals, however, year/year growth has slowed to only 3.2 Bcf/d over the past seven days, EBW said. This spring, maintenance outages are likely to have a greater decremental effect on total LNG feed gas demand, “if for no other reason than aggregate demand is higher than last year.
“In 2019, LNG demand plunged more than 2.2 Bcf/d from early March to early April. If a greater reduction does in fact occur in spring 2020, Nymex futures are likely to come under renewed bearish pressure.”
Northeast Cash Below $2
With temperatures on the rise, Northeast cash markets continued to lead the pack lower on Friday, with prices tumbling back below the $2 threshold.
New England pricing hubs fell back around 40 cents or more, but even more connected areas of the Northeast experienced a sharp sell-off. Transco Zone 6 NY tumbled 33.5 cents to $1.900 for gas delivered through Monday.
Prices across Appalachia fell 15 cents or less at most hubs, but Texas Eastern M-3, Delivery plunged a more pronounced 26.0 cents to $1.740.
Declines ranged mostly from 5-10 cents across the country’s midsection, while farther west, CIG in the Rockies slipped just 4.0 cents to $1.635.
In California, SoCal Citygate spot gas fell 10.5 cents to $2.150 for the three-day delivery period.
Cash prices across the border in Western Canada also gave up ground, shedding around 5 cents at most hubs.
Meanwhile, both Nova Gas Transmission field receipts and net exports experienced a moderate decline during week, with freeze-offs to blame for the former as temperatures dipped towards more normal levels for this time of year, according to TPH. Field receipts dropped to lows of 11.3 Bcf/d from highs of around 12 Bcf/d at the beginning of February, the firm said.
Net exports have continued to run below last year’s levels, according to TPH, averaging only 6.1 Bcf/d year to date versus 6.8 Bcf/d in 2019. Analysts expect it to take only about 300 MMcf/d of lower exports on a sustained basis throughout 2020 to restore western Canadian inventories to the five-year average, from a 23% deficit as of Friday.
As for the latest storage inventory data, Western Canadian inventories fell by 6 Bcf relative to seasonal norms of 10 Bcf, TPH said. Eastern Canada inventories declined by 9 Bcf relative to historical norms of 14 Bcf, holding inventories flat week/week at a 24% surplus to the five-year average, according to the firm.