Volatility in the Northeast sent natural gas spot prices on a rollercoaster ride during an abbreviated holiday week, with prices spiking in the region Monday, plunging the next day and then soaring anew to close the trading period.
When the dust settled, weekly cash prices advanced along with Northeast gains. NGI’s Weekly Spot Gas National Avg. for the Nov. 22-24 period – shortened because of the Thanksgiving Day Holiday – rose 13.5 cents to $5.010. Gas traded during the period was scheduled to flow from Nov. 23-29.
Weather conditions were benign in most parts of the Lower 48 during the period, generating modest heating demand. But the pair of Northeast surges – one on Monday and the next two days later – powered the overall average higher.
Propelled by continued strong demand for U.S. liquefied natural gas (LNG), the December Nymex contract rallied during the week and finished strong. The prompt month settled at $5.068/MMBtu to close the trading week on Wednesday, up slightly from the prior week’s finish of $5.065.
Looking ahead, while the December outlook was bearish prior to the holiday weekend, NatGasWeather said a wintry mix of rain and snow would push across the Great Lakes into the Northeast to start the week ahead.
However, the firm added, temperatures were expected to prove 10-30 degrees warmer than normal in early December. “The weather data is so bearish for the first week of December, it would be difficult to be more so.”
Futures Forge Ahead
Futures traders, in contrast, focused on forecasts for intense winter chills across Europe and Asia in coming weeks – and expectations for ongoing demand for U.S. exports of LNG.
Feed gas volumes held above 11 Bcf throughout the trading week and were broadly expected to reach record levels above 12 Bcf this winter, fueled most notably by European demand.
With storage levels precariously light in Europe, demand for U.S. exports has been strong through the fall and is now expected to intensify as winter arrives. Russian deliveries of natural gas to Europe were expected to accelerate in November – following vows from President Putin – but volumes have only gradually climbed.
Additionally, the United States imposed new sanctions on Russia’s recently completed but still inactive Nord Stream 2 (NS2) pipeline. Because NS2 could deliver much-needed gas to Europe as soon as 2022, any potential disruptions stoke supply concerns and add to expectations for demand for U.S. LNG. Commissioning NS2 had already been delayed by German regulatory snags.
“Losing the prospect of more Russian gas soon via Nord Stream 2 is a bullish development for gas traders, who are now adding premiums to European prices, removing the possibility of a supply relief from the east from the equation,” Rystad Energy analyst Carlos Torres Diaz said. “Taking this supply potential out of the equation suggests Europe will continue to rely on LNG over the winter to provide flexibility, creating more buy-side competition for international cargoes.”
Futures markets also welcomed the onset of the storage withdrawal season in the United States.
The U.S. Energy Information Administration (EIA) on Wednesday printed the season’s first pull from storage, an in-line 21 Bcf decrease for the week ended Nov. 19. EIA posted the result a day early because of Thanksgiving.
Ahead of the EIA report, the median estimates found by major polls consolidated around a withdrawal in the low 20s Bcf. Total working gas in storage stood at 3,623 Bcf, 320 Bcf below year-earlier levels and 58 Bcf below the five-year average.
The December Nymex contract gained 10.1 cents Wednesday to close trading before the holiday.
Spot prices on Wednesday clawed out a late-week gain, lifted by spikes in the East, where temperatures were expected to rise but held near freezing territory the day before the holiday.
NGI’s Spot Gas National Avg. on Wednesday for Thursday through Monday delivery gained 11.5 cents to $4.945.
Midwest prices were also up across the board, with Chicago Citygate ahead 10.5 cents to $4.800.
NatGasWeather noted that benign temperatures were expected across much of the country on Thanksgiving Day and into the following day.
However, a new cold shot was expected to sweep across the Midwest into the East over the weekend and linger for a couple days, ushering in lows from the teens to the 30s “for a swing back to strong national demand.”
Heating needs could dissipate over the first several days of December, though, as a pattern poised to bring comfortable highs in the 50s to 70s is expected to leave large sections of the Lower 48 enjoying warm temperatures, NatGasWeather said.
That noted, another turn lies ahead, as weather systems with rain, snow and chilly highs in the 30s are expected to track across the northern United States by mid-December, the firm said.
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