- BREAKING: U.S. EIA on Friday reported a withdrawal of 187 Bcf from natural gas storage for the week ending Jan. 15
- LNG feed gas levels dropped lower
- Cash prices were flat following two steep drops
For a third-straight day, Natural gas futures gave up ground, with warmer weather outlooks outshining expectations for a steep storage withdrawal. The February Nymex gas futures contract settled at $2.491, down 4.8 cents day/day. March fell 3.6 cents to $2.497.
“Weather is king,” Bespoke Weather Services said, “and continued warmth will keep the market under pressure.”
NGI’s Spot Gas National Avg., meanwhile, narrowly avoided a three-day losing streak by finishing flat at $2.550.
Weather models have shifted both colder and warmer at various points over the past few days, injecting variability into the mid-range outlook for heating demand. Broadly, however, earlier expectations for a severe winter freeze have eased.
Forecasters continue to predict a solid surge of cold next week, though freezing temperatures now are not expected to extend as far as previously thought or last as long. As recently as last week, meteorologists were anticipating a polar vortex – a cold snap that develops in the atmosphere above the North Pole and sends harsh blasts of subzero temperatures throughout the Northern Hemisphere. This could have pushed the anticipated freeze as far south as Texas and enabled the cold to last well into February.
Meteorologists have since backed off polar vortex expectations, and a warming pattern is projected to return by early next month, impacting demand for gas-powered heating.
Over the first few days of February, above average temperatures are likely to be “widespread from the Rockies to the Midcontinent and Northeast, including a couple days of much aboves in the Midcontinent,” Maxar’s Weather Desk said Thursday. “Belows fade in the East early, giving way to aboves in the latter part of the period.”
Weakening levels of U.S. liquefied natural gas (LNG) exports this week provided traders with more to digest. While robust demand from Asia has fueled strong export demand much of this winter, LNG feed gas volumes that had exceeded 11 Bcf last Friday, fell below that threshold on Tuesday and Wednesday, close to 10 Bcf, and then dropped down to 9.4 Bcf on Thursday, according to NGI data.
Wood Mackenzie, however, suggested that temporary challenges at Cheniere Energy Inc.’s Sabine Pass LNG facility are more likely to blame than a sudden drop in demand.
Much of these declines “are concentrated” at Sabine Pass, “where heavy fog has significantly affected visibility,” Wood Mackenzie analyst Preston Fussee-Durham said.
Currently, there is a “high probability” of fog through Friday and a moderate chance of fog through next Tuesday (Jan. 26).
Fussee-Durham also noted that Creole Trail Pipeline was scheduled to perform maintenance Thursday, and estimated deliveries from the pipeline to Sabine Pass were down by 386 MMcf/d.
Relatively strong LNG demand last week, meanwhile, combined with winter heating demand helped to galvanize withdrawals from underground gas storage, according to analysts’ expectations.
The U.S. Energy Information Administration (EIA) on Friday is projected to report the steepest pull from stockpiles of the season.
NGI’s model predicted a 191 Bcf withdrawal for the week ended Jan. 15. That would compare with a 97 Bcf pull recorded in the year-ago period and a five-year average withdrawal of 167 Bcf.
A Bloomberg survey landed at a median expected pull of 175 Bcf, with projections ranging from decreases of 158 Bcf to 191 Bcf. A Reuters poll found estimates spanning withdrawals of 133 Bcf to 191 Bcf, with a median decrease of 178 Bcf.
Bespoke estimated a 177 Bcf decline in storage.
EIA reported a withdrawal of 134 Bcf for the week ended Jan. 8.
This week’s report is scheduled for Friday at 10:30 a.m. ET, a day later than usual because of Wednesday’s presidential inauguration and the Martin Luther King Jr. federal holiday on Monday.
Markets also are absorbing a frenetic pace of change under newly minted President Biden. Before his first day culminated, Biden issued several executive actions, notably including an order for the United States to reenter the United Nations climate accord, widely known as the Paris agreement. Biden campaigned on a $2 trillion infrastructure and clean energy plan to address climate change.
Over the course of Wednesday and Thursday, amid a series of other actions that included revoking a key permit for the Keystone XL oil pipeline and unveiling names for leadership positions across the Interior and Energy departments, the president named Richard Glick, a Democrat, as FERC chairman.
Glick often clashed with his Republican counterparts at the Federal Energy Regulatory Commission, including on reviews of the impacts of natural gas infrastructure projects on climate change. Analysts said he is expected to be a Biden ally in efforts to combat global warming.
“We expect FERC to move away from a ‘market above all else’ stance” on regulation, analysts at ClearView Energy Partners LLC said.
Spot gas prices held steady Thursday after two days of substantial losses amid benign weather and light heating demand. Across much of the Midwest, for example, high temperatures ranged from the mid-30s to mid-40s, well above highs in the 20s typically seen in mid-January.
Stronger near-term demand should start to develop Friday, however, if forecasts prove accurate, and several hubs eked out modest gains ahead of the incoming chill.
Weather outlooks called for colder conditions over most of the northern United States Friday and into the weekend, with highs back into the teens and 20s in the Upper Midwest. Swaths of the western United States will see chilly rains and bouts of snow.
Lows in the teens, and potentially near zero, are then expected early next week in the Midwest and into the East. However, by early February, warmth will gradually return, according to Maxar’s Thursday forecast.
EBW Analytics Group, however, noted that, while warmth to start February looked likely, wild swings in weather models this week diminished confidence in the mid-range outlook.
“This exceptionally high model volatility could result in continued sharp price swings,” EBW said. “It stems from strong bullish signals in the Arctic and over Greenland, coupled with uncertainty in the Pacific and the tropics.”
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