With Gulf Coast liquefied natural gas (LNG) facilities unscathed by Hurricane Delta, export demand’s quick rebound combined with a chillier forecast to send natural gas futures sharply higher Monday. The November Nymex gas futures contract jumped 14.0 cents to settle at $2.881. December climbed 6.7 cents to $3.271.
Spot gas prices also posted stout increases across most of the United States. NGI’s Spot Gas National Avg. shot up 61.0 cents to $1.920.
Monday marked the fourth consecutive day of gains for Nymex futures and could kick off a sustained rally in natural gas prices over the coming months.
Several factors are working in favor of bulls at the moment. On the demand side, LNG feed gas volumes started to climb over the weekend and made a huge jump Monday. Deliveries to U.S. terminals shot up nearly 1.5 Bcf day/day to above 7 Bcf.
Cameron LNG, which was still ramping up following Hurricane Laura when it opted to shut down operations ahead of Delta, sustained no damage from the latest storm. The Cameron team “began assessments early Saturday and determined it was safe to restart production on Sunday.
“We have resumed work to execute our plans toward achieving full production,” spokesperson Anya McInnis told NGI. “Additionally, we are working closely with the Port of Lake Charles to assess the condition of the Calcasieu Ship Channel to confirm accessibility to our jetties.”
Sabine Pass continued to operate throughout the storm. Cove Point also completed its fall maintenance and is ramping up production.
“Based on current LNG feed gas demand and spare capacity, it is feasible that daily volumes could top 10 Bcf as the market transitions to withdrawal season,” said Mobius Risk Group. “This would be a monumental benchmark to eclipse as it would magnify how undersupplied the market could be during the upcoming winter season.”
However, the Houston-based firm said it’s important to note that hurricane season is not over yet, so this facet of the North American natural gas market should continue to have the potential for heightened volatility. In addition, the amount of gas in European storage also should not be ignored.
Weather demand also is improving. The cooler momentum established in last week’s forecasts continued over the weekend, according to Bespoke Weather Services. The firm said there was another “sizable” addition of forecast gas-weighted degree days (GWDD) in the latest models and it now projects October’s total GWDD count to be above 340, nearly 50 above the projection from 10-12 days ago.
“This is still well under the total demand level of the last two Octobers, however, but closer to normal,” Bespoke said.
The best cooling versus normal lies in the middle of the country, according to Bespoke, with occasional pulses into the East. Southern demand is strong the next few days, which is keeping power burns “impressive” for this time of year, but heat is expected to fade after the middle of the week. This would leave the South in a “much more tame demand regime,” the forecaster said.
Supply In Flux
With Delta now in the rearview mirror, offshore production that was shut-in ahead of the storm was set to ramp up in the coming days as crews returned.
The Bureau of Safety and Environmental Enforcement (BSEE) said as of 11:30 a.m. CT on Monday about 47% of the natural gas and 69% of the oil production in the Gulf of Mexico (GOM) remained shut-in following Delta. This was down from the roughly 62% of gas and 91% of oil production that was offline as of midday Sunday.
Personnel remained evacuated from 124 production platforms, which is about 19% of the manned platforms operating in the GOM, according to BSEE. All personnel that had been evacuated from nondynamically positioned rigs had returned, and all dynamically positioned rigs moved off location for Delta were back at their original sites.
Meanwhile, Natural Gas Pipeline Co. of America said Monday hurricane force winds, loss of power and flooding near Cameron Parish, LA, have temporarily impacted operating conditions and compressor stations in the area. Some locations along the pipeline remained shut-in, while several others have been returned to normal operating conditions. Compressor stations (CS) 342 and 348 remained unavailable, and CS 343 and 346 had been returned to normal.
Several other pipeline maintenance events were also hampering Lower 48 output. Columbia Gas Transmission (TCO) began restricting more than 0.5 Bcf/d of flows in West Virginia and Pennsylvania on Saturday and would continue to do so until further notice, according to Genscape Inc. In total, 588 MMcf/d of southbound and westbound flows are being restricted, with the most impactful restrictions occurring at the Clendenin to Waynesburg MA35 throughput meter in West Virginia.
Other throughput meters to be impacted were the Sherwood A MA42, Lone Oak A MA41 and Artemas MA25. TCO declared a force majeure and put these restrictions in place from operating conditions on Texas Eastern Transmission, limiting deliveries at the interstate interconnect between the two pipelines, Genscape analyst Anthony Ferrara said.
Furthermore, TCO is experiencing reduced storage injection capabilities as storage nears capacity. Increased line pack levels and lower forecast demand also have lowered injections to start the week.
“The supply/demand balance has tightened compared to last week and is likely the primary driver of today’s gains,” said NatGasWeather. “It did also help the weekend weather data added some demand on cooler trends.”
EBW Analytics Group pointed out the latest Commodities Futures Trading Commission data showed that speculator natural gas net long positions increased to 324,000 contracts as of Oct. 6, effectively matching Sept. 15 for the most bullish net longs since June 2017. The number of longs declined slightly for the second straight week, reducing exposure by 2,000 contracts.
“This decline was outpaced, though, by closing 14,000 short positions,” EBW said.
Although speculators remain relatively bullish and managed money positioning the most bullish since April 2019, swap dealers have amassed the largest net shorts since 2007, according to EBW. “While our outlook has a bullish tilt, the opportunities are not just at the front-end of the curve. Instead, in a chronically undersupplied market, the entire 12-month strip is arguably underpriced.”
Spot gas markets across the Lower 48 posted substantial gains Monday. Midwest and Northeast prices were higher thanks to several weather systems tracking across the regions and boosting heating needs. Pipeline maintenance also factored into the increases.
Gains along the Gulf Coast were attributed to returning heat following Delta, with high temperatures forecast to reach the 90s most of this week.
NatGasWeather said a stronger cold shot is forecast to follow into the Midwest late in the week. That system is projected to send overnight lows into the teens and 30s, while also advancing deeper into the United States. The Global Forecast System model showed a second blast of chilly air following Oct. 19-21, while the European model showed some cool weather lingering but not nearly as cold or widespread.
“This will need resolving because if the weather data is struggling for the Oct. 19-21 period, what follows is susceptible to changes in time,” NatGasWeather said.
Meanwhile, a slew of pipeline maintenance events were set to reshuffle gas flows this week and beyond.
Millennium Pipeline was set to conduct a pipeline upgrade on its CPV Lateral beginning Monday and continuing through Friday. During the work, no deliveries were to be scheduled to the CPV Valley Power Plant in Orange County, NY.
Deliveries to this meter have averaged 104 MMcf/d over the last 14 days, according to Genscape. Analyst Josh Garcia said that older New York Independent System Operator gas generators such as Selkirk and Bowline could help make up for the lost generation from CPV Valley, “although that will likely be unnecessary due to mild temperatures and low demand forecasted for this date range.”
Millennium lifted a force majeure effective on the intraday1 cycle of Monday’s gas day from an unplanned outage on a small segment in the Eastern section of the pipeline near Rockland County, NY. “…Production on Millennium fell 290 MMcf/d over the duration of the outage, and total Algonquin supply fell by around 0.7 Bcf/d from Oct. 8 to Oct. 10, although receipts have since recovered via alternative routes,” Garcia said.
Even with the force majeure lifted, price gains were extensive throughout the Northeast. Algonquin Citygate next-day gas climbed 59.5 cents to $1.520.
Similarly stout increases were seen across Appalachia. Columbia Gas jumped 97.0 cents to $1.535 because of pipeline maintenance work. Other pipeline work events were shuffling flows and causing spikes elsewhere. Transco-Leidy Line was up 62.5 cents to $1.170.
Among the slew of pipeline events, Transcontinental Gas Pipe Line, aka Transco, was limiting a portion of north to south compression capacity through Oct. 31 as it uprates Station 185 Unit #11 in Fairfax County, VA. The work is part of its Southeastern Trail Expansion project.
During the outage, several nonprimary firm transportation rate schedules were to be unavailable, with primary firm transportation also at risk contingent on utilization. Normal operational capacity of 2.2 Bcf/d was limited to 1.85 Bcf/d at the Mainline MP 1582 north-to-south throughput meter for the duration of the outage.
“Flows through this constraint have averaged 1.97 Bcf/d and maxed at 2.06 Bcf/d over the 30 days prior to the outage, although flows have trended downwards over the last month as we have moved into shoulder season,” Garcia said.
Meanwhile, East Tennessee Pipeline had an outage at its Rural Retreat, VA, compressor station on 3300 Line until Friday. As a result, the Cascade Creek interconnect in Rockingham, NC, must net zero for the duration of the outage. Genscape said Transco for the last two weeks had reported an average of 106 MMcf/d and a max of 186 MMcf/d in receipts from East Tennessee.
“Nominations at the time of writing do not yet reflect altered flows on either the Transco or East Tennessee side,” Garcia said Monday. “With imports from Z6 currently projected to be constrained until the end of the month, and one of the few sources of alternative supply in Z5 shut in for the next few days, imports from Z4 may increase should demand necessitate it.”
Southeast market hub prices generally climbed between 45.0 and 55.0 cents day/day, as did those in the Midcontinent.
Bridgeline Pipeline from Tuesday through Oct. 19 was to undergo required maintenance that would result in a complete curtailment of deliveries from Sabine Pipeline. Genscape said in recent days, deliveries to Bridgeline, an intrastate pipeline providing transportation and storage services to South Louisiana’s industrial, power and utility marketplace, has surged from 134 MMcf/d to above 350 MMcf/d.
As a result, Tuesday’s curtailment was expected to impact 350 MMcf/d of deliveries, nearly 76% of all deliveries made on the Sabine system relative to Monday’s gas day, and 56% based on the prior 30-day average, according to Genscape.
Meanwhile, Southern California Gas was expected to carry out work in the Wheeler Ridge Zone this week. With the looming heat wave, however, that event had been removed from the maintenance calendar, and no update was provided.
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