• Liquefied natural gas levels held strong
  • Production also remained at high levels
  • Weather and the pandemic were wildcards

Natural gas futures climbed higher Monday as export levels held strong, prospects for weather-driven demand improved slightly and continued positive news on the coronavirus vaccine front bolstered confidence across markets.

markets

The December Nymex contract gained 6.1 cents day/day to start the abbreviated trading week and settled at $2.711/MMBtu. January rose 5.3 cents to $2.823.

NGI’s Spot Gas National Avg., meanwhile, advanced 24.0 cents to $2.430 as a blast of cold hit parts of the northern United States and fueled demand.

Lower 48 production over the weekend and into Monday hovered around 90 Bcf/day, near six-month highs. On the demand side, liquefied natural gas (LNG) feed gas levels continued near 10 Bcf/d, close to record levels as demand from Europe and Asia for U.S. exports held steady as it has all month.

Meanwhile, forecasters said the European model added a few heating-degree days for the coming two weeks, providing a small dose of demand optimism as a bout of cooling moved across the northern United States early this week. Above-normal temperatures are expected throughout the northern part of the country later this week and into next, however, while comfortable conditions are projected across the southern half of the Lower 48 through the first week of December.

“It still appears that warmer than normal conditions will prevail at least through December’s first half,” Bespoke Weather Services said.

“We will be cautious in assessing price action this week,” the forecaster added, “given a likely lower volume trading week with the holiday coming up, along with December expiration, both of which could lead to erratic price action regardless of actual data changes.”

The trading week culminates Wednesday and the December contract rolls off the boards on the same day, ahead of the Thanksgiving holiday on Thursday.

“As it stands right now,” Bespoke said, “we still need to see more change away from the warm side in the weather pattern for us to believe in a sustainable rally in prices at the front of the curve.”

EBW Analytics Group analysts agreed that the short week could prove uneven, and they noted that the Energy Information Administration (EIA) will add another wrinkle Wednesday, posting its weekly storage report a day early because of the holiday.

“Options expiration and contract settlement could add volatility this week, especially with EIA publishing this week’s storage report on Wednesday, just hours before December trading ends,” the EBW analysts said.

Analysts at the Schork Report said the consensus of early estimates points to a modest storage build for the week ended Nov. 20, countering the five-year average of a 37 Bcf withdrawal.

EIA reported an injection of 31 Bcf into gas stockpiles for the week ending Nov. 13, exceeding expectations. Prior to the report, a Bloomberg survey produced a median estimate of a 22 Bcf increase, the highest of major polls, and NGI modeled a 23 Bcf injection. A year earlier, EIA recorded a 66 Bcf withdrawal for the period.

The latest build lifted inventories to 3,958Bcf, above the five-year average of 3,727 Bcf.

EIA reported an injection of 8 Bcf into storage for the week ending Nov. 6.

The pandemic, meanwhile, continues to intensify, raising concerns about near-term economic restrictions and potential impacts on energy demand, while vaccine news is fueling optimism for 2021.

U.S. hospitalizations on Sunday, at 83,870, set a record for the 13th consecutive day, according to the Covid Tracking Project. New U.S. cases topped 142,700 on Sunday, down from Friday’s record, Johns Hopkins University reports. That tally was nevertheless the highest number recorded on a Sunday. Testing and case totals have tended to be lighter on weekends.

At the same time, however, progress on vaccines is accelerating. Three different vaccines have been found to be 90% effective or better this month. A vaccine developed by the University of Oxford and AstraZeneca was the latest to reach that threshold, with researchers announcing the news Monday.

“Ultimately, a safe, widely available vaccine will not only save lives but will also allow us to return to normality,” Raymond James & Associates Inc. Chief Investment Officer Larry Adam said.

Major stock indices and West Texas Intermediate crude oil prices made gains Monday.

Cash Climbs

Spot gas prices climbed amid a cold shot with rain and snow that began sweeping across the Great Lakes and the Northeast on Monday. It was expected to continue into Tuesday.

NatGasWeather said freezing temperatures accompanying the weather pattern would result in “a modest bump in national demand,” given that the “southern U.S. remains nice with highs of 60s to 80s,” and the West is mixed early in the week “as weather systems track through with mild to cool highs of 40s to 60s” over swaths of the region.

“After the Northeast cold shot exits Tuesday,” however, much of the Lower 48 “will warm above normal” Wednesday through Sunday, curbing demand, the forecaster said.

Looking into early December, the northern United States “will see a mix of weather systems and warm breaks but overall warmer than normal, with highs 30s-50s. The southern U.S. will be mild to warm with highs of 60s and 70s,” NatGasWeather said.

Hubs in the Northeast led the upward march in cash prices Monday.

Algonquin Citygate spiked $1.295 day/day to an average $3.280, while Tenn Zone 6 200L soared $2.155 to $4.320, and PNGTS jumped 88.5 cents to $4.310.

Elsewhere, price gains were widespread but modest relative to the Northeast.

In the Rocky Mountains, Opal gained 25.5 cents to $3.125, while Columbia Gas in Appalachia moved up 20.5 cents to $2.075.

El Paso S. Mainline/N. Baja led hubs in the West, advancing 68.5 cents to $2.820.