Natural gas futures gave up ground on Monday as traders mulled waning weather-driven demand and the potential implications of a cybersecurity attack on the largest fuel pipeline in the United States.   

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The June Nymex contract dropped 2.6 cents day/day and settled at $2.932/MMBtu. July fell 2.6 to $2.978.

NGI’s Spot Gas National Avg. advanced 5.5 cents to $2.745 amid a near-term round of chilly temperatures.

Cool conditions over the Rockies, Midwest and Northeast early this week could add further support to cash prices, NatGasWeather said. But after cool temperatures fade by next week, it could take a couple more weeks for consistent heat to arrive and usher in the summer cooling season. This could result in relatively modest demand for natural gas over most of May.  

Over the weekend, both the domestic and European weather models shed modest degree days, keeping the five- to 15-day forecast “bearish weighted since comfortable temperatures will rule large stretches of the U.S., resulting in what’s expected to be light national demand,” the forecaster said.

The “first opportunity for more intimidating heat to show up in the weather maps won’t be until the last week of May,” NatGasWeather said. “To our view, the longer it takes for heat to show up in the maps, the more likely the natural gas markets will get impatient waiting. We continue to expect a hotter-than-normal summer over much of the U.S.; it’s just not expected to arrive for another two to three weeks.”

As a result, the firm said it anticipates the “largest weekly builds so far this year” with U.S. Energy Information Administration (EIA) storage reports in May.

Looking ahead to this week’s report, to be released Thursday, NGI’s model is forecasting an 82 Bcf injection for the week ended May 7. That would match the five-year average build. Last year, EIA recorded a 104 Bcf injection for the similar week.

[Interested in NGI’s Weekly NatGas Storage figure? Sign up to receive our machine learning estimate of the EIA storage injection/withdrawal figure every Wednesday. Click to learn more about this free resource.]

Other fundamentals remain in favor of natural gas prices, with production holding near 90 Bcf – below pre-pandemic record levels – and exports consistently strong. Liquefied natural gas (LNG) volumes topped 11.5 Bcf on Monday, within striking distance of all-time highs. Pipeline exports to Mexico also are holding strong.

Cybersecurity Uncertainty

However, a cybersecurity attack late last week that forced Colonial Pipeline Co. to shut down its sprawling refined products pipeline system created a wild card for traders across energy markets to assess. 

With much of the system still offline on Monday, analysts said the ultimate implications remained unknown. But if the outage lasts several more days, it could result in shortages of gasoline, diesel and jet fuel throughout the East Coast just ahead of the summer travel season and as major metropolitan economies are fully reopening after long pandemic-induced lockdowns.

Gasoline futures rose modestly on Monday.

“The Northeast Gasoline Supply Reserve holds only about one million barrels, less than one day’s worth of regional supply. Prices may soar if inventories are drawn down before the pipeline restores service,” EBW Analytics Group said Monday. “With no reported physical damage to the pipeline, however, the pipeline may be able to quickly restart service at any time.”

Colonial’s system, which spans more than 5,500 miles, transports more than 100 million gallons of fuel daily. The company transports nearly half of the East Coast’s fuel supply from the Gulf Coast.

The Georgia-based company said it was the victim of a ransomware attack that infiltrated some of its information-technology (IT) systems. It has not said if it paid a ransom. It said that investigations were ongoing, and it had not yet announced a date for when the company’s system would resume full operations. Analysts said the concern is that hackers could potentially move from the IT network into pipeline operations.

While the incident does not impose direct impacts on natural gas, analysts said it fuels broader concern about the U.S. energy sector’s vulnerability. This could intensify if the Colonial system remains offline long enough to create supply problems and price pressure.

“It’s not often that hackers manage to hit such crucial oil infrastructure such as Colonial’s pipelines in the U.S., but such an event and the associated fear of prolonged outages has taken over the psyche of traders,” said Rystad Energy analyst Louise Dickson.

Spot Prices Bounce

Next-day cash prices advanced as the cool temperatures to start the week fueled demand from the Rocky Mountains to the East Coast.

In the Rockies, Kern River climbed 9.0 cents to $2.800 and Opal also picked up 9.0 cents to $2.800.

To the East, Algonquin Citygate gained 14.5 cents to $2.675, while Millennium East Pool advanced 16.0 cents to $2.165.

NatGasWeather said regional cooling demand could persist during the trading week.

“Weather systems and associated cool shots with showers and thunderstorms will continue across the Plains, Midwest and Northeast this week, with highs of 40s to 60s and lows of 30s and 40s,” the forecaster said.

“Cooling will also push into Texas, the South and Southeast,” however, “with highs of 70s to low 80s for light demand. The Northwest will be nice with highs of 60s and 70,” NatGasWeather said.

The firm indicated that air conditioners could get cranking this week in parts of California and the Southwest – where highs in the 80s and 90s are expected — potentially driving further price momentum in those regions.

On Monday, SoCal Citygate jumped 40.5 cents to $3.370, while Kern Delivery rose 21.0 cents to $2.995.

On the pipeline front, Columbia Gas Transmission said it would begin maintenance work Tuesday on its Line 1983 Pipeline, cutting flows at its meter in Wetzel County, WV. The work was rescheduled from earlier this month because of inclement weather.

Wood Mackenzie estimated the Smithfield-Mobley interconnect would be reduced to zero total capacity on Tuesday. Receipts at the meter have averaged 170 MMcf/d over the last 30 days, the firm said.