Though power burns have been persistently strong throughout the summer and into the fall, rising wind generation this week stole some market share from natural gas. 

storage Oct. 8

Spot gas prices tumbled from last week’s levels as weather proved pretty close to perfect across much of the country during the Oct. 11-15 period. NGI’s Weekly Spot Gas National Avg. plummeted 34.5 cents to $5.235.

Nymex natural gas futures remained volatile, though U.S. weather data proved much more influential than global factors this week. The November Nymex contract closed the week at $5.410, off 27.7 cents from Thursday’s close but up 6.5 cents from Monday’s settlement.

The Pacific Northwest had some of the Lower 48’s only chilly weather this week, with snow falling in parts of Wyoming, Nevada and Utah early in the period. However, that wasn’t enough to stave off dramatic spot gas losses in the region. Northwest S. of Green River plunged 73.5 cents on the week to average $4.970.

Markets in the Desert Southwest came off around 55 cents or so week/week, while in California, the SoCal Border Avg. was down 52.5 cents to average $5.565 for the Oct. 11-15 period.

Elsewhere across the country, Henry Hub dropped 37.5 cents week/week to average $5.505, and Columbia Gas slipped only 3.0 cents to $4.775.

Some Northeast locations finished the week in the black as production in the region fell significantly early in the period and had yet to recover by Friday. Algonquin Citygate cash averaged $5.250 for Oct. 11-15, up 16.0 cents week/week.

“The wind forecast keeps us well above levels that we saw” last week,” Bespoke Weather Services said. “This remains a volatile market, however, so caution is advised.”

[Actionable Insight: Did you know that NGI is one of only two Price Reporting Agencies that include trade data from the Intercontinental Exchange. Find out more.]

Weather Dominating U.S. Futures

Extreme gyrations continued along the futures curve into the middle of October, though domestic fundamentals played a larger role in the steep decline.

At the heart of recent weakness is weather. Forecasts continue to show a lack of cold air moving into the United States, keeping temperatures on the milder side and heating/cooling demand in check. There is expected to be a brief period of cooler weather hitting the country by next weekend, but the latest models trended a little warmer in the latest runs. As such, demand is expected to experience only a “modest bump,” according to NatGasWeather.

Temperatures are forecast to hold in the 60s to 80s across most of the country until then, and a warmup is expected as soon as Oct. 27. This puts a “bearish lean” to the back end of the 11- to 15-day forecast.

“Colder trends can come quickly, and when they do, the nat gas markets will be sure to notice,” NatGasWeather said. “Although, the longer it takes, the more impatient the markets could become, potentially forcing bulls to reduce risk.”

Some concerns about the winter have already begun to dissipate. Storage inventories have swelled over the past month and with the continuation of mild weather, stocks are set to improve further. There are risks, however.

The latest government storage data reflected the substantial impact wind generation can have on gas power burns and subsequently, storage. The Energy Information Administration (EIA) said inventories rose only 81 Bcf for the week ending Oct. 8. The figure came in a few Bcf below even the lowest estimate ahead of the report, and some projections had even called for another triple-digit build.

Initially, there was a bullish reaction to the EIA storage report along the Nymex curve, with the November contract soaring all the way to $5.96. However, selling began ahead of Thursday’s midday model runs, which backed off the projected demand associated with the coming cool front. This is likely because wind immediately was credited for the smaller-than-normal build, which has reversed rather significantly this week.

Broken down by region, the Midwest led injections with a 26 Bcf increase in stocks, according to EIA. The South Central region added 25 Bcf, including 15 Bcf into nonsalt facilities and 10 Bcf into salts. East inventories rose by 24 Bcf, while the Mountain and Pacific regions each climbed by less than 5 Bcf.

Total working gas in storage as of Oct. 8 stood at 3,369 Bcf, which is 501 Bcf below year-ago levels and 174 Bcf below the five-year average, EIA said.

Participants on The Desk’s online chat Enelyst were unclear whether the tightness seen in the latest EIA data is something that could carry forward. Although the latest weather models have added some demand for October, weather forecaster DTN’s week 4 outlook shows a continuation of the cool West/warm East pattern.

Relative to extremely warm near-term anomalies, late October and early November may be less bearish than this month to date, according to EBW Analytics Group. More important, however, is the potential start of a weather pattern shift in a cooler direction in week 4. DTN’s forecast highlights cold risks if the transition is faster than anticipated.

NatGasWeather pointed out that though volatility remained in full effect this week, prices “could be simply trading a range” waiting for more intimidating cold shots to push into the United States Undoubtedly, traders also are keeping a close watch on weather in Europe and Asia.

“This makes every weekend going forward exceptionally dangerous to hold,” NatGasWeather said.

Falling Like Dominoes

Near-perfect weather across most of the country, even in Texas, drove major losses in the spot gas market on Friday.

The National Weather Service said while the cooler temperatures were not likely to break many (if any) records, daily temperature departures of 10-20 degrees below normal were expected first in the Rockies and the High Plains. The front moving through the Rockies then was expected to quickly push east on Saturday, ushering in drier and more autumn-like temperatures from the Great Lakes to the western Gulf Coast. Most of the East Coast also is to receive a dose of much cooler temperatures by Sunday.

Given fall’s arrival in the Lone Star State, spot gas prices in the region plunged. Katy spot gas prices on Friday tumbled 41.5 cents to $5.180 for gas delivery through Monday, with similar steep decreases seen elsewhere.

Several locations in the country’s midsection posted sharper declines amid the lack of heating or cooling demand. Consumers Energy cash was down 57.5 cents to $5.080 for the three-day gas period, and Ventura was down 57.0 cents to $4.965.

Henry Hub spot gas prices averaged $5.460 after tumbling 37.0 cents day/day, while farther east, Cove Point averaged $4.990 after dropping 41.0 cents.

Markets in the Northeast slid mostly between 50.0 cents and 80.0 cents day/day, and over in the Rockies, Northwest Sumas led the region’s losses with a 69.0-cent decline to $5.490 for gas delivery through Monday.

Cash prices north of the border in Western Canada also tanked despite some pipeline maintenance that would restrict gas flows in the region.

Nova Gas Transmission Ltd. (NGTL) announced that firm transit receipts in the Upstream James River (USJR) region would be cut by 33%, effective Friday and lasting until further notice. The cuts are attributed in part to ongoing maintenance events at both the Berland River 1A compressor station and the Latornell compressor station, according to Wood Mackenzie.

The impacted segments include segments 2, 3, 4, 5, 7, partial 8 and partial 9, including the Aitken Creek, Big Eddy, Groundbirch East, Gordondale and January Creek interconnects. During this time, interruptible transit receipts in the USJR region are to be cut to zero allowable until further notice.

“The USJR region takes gas produced in Alberta and transports it either west toward end users via pipelines in British Columbia, or through pipelines that serve Western United States/Eastern Canadian markets,” Wood Mackenzie analyst Quinn Schulz said.Despite the restrictions, prices across Western Canada buckled on Friday. NOVA/AECO C came off 41.0 cents to average C$4.970/GJ for gas delivery through Monday.