Natural gas futures on Friday traded in a narrow range of gains and losses as markets mulled weather-driven demand concerns against encouraging signs of tighter balances, notably including stronger liquefied natural gas (LNG) volumes that helped minimize storage injections.   

Markets

The December Nymex contract ultimately gained 5.3 cents day/day and settled at $3.354/MMBtu. January rose 5.2 cents to $3.469.

Spot gas prices declined, however, amid expectations for mild weather. NGI’s Spot Gas National Avg. fell 16.0 cents to $2.880.

Weather forecasters made warmer revisions to their outlooks early Friday. While cold continued to permeate the nation’s midsection, models indicated that the chill likely would not stretch to most of the eastern half of the Lower 48. Meanwhile, looking further into November, forecasts called for comfortable fall temperatures to reach across much of the country, minimizing both heating and cooling demand.

Bespoke Weather services said under its Friday forecast, November would see 552 gas-weighted degree days, notably below the 10-year normal of 592.

Models “continue to keep any medium-range cold in the western half of the nation, with a downstream upper level ridge in the East, meaning above to much above normal temperatures,” Bespoke said. “Weather is now becoming the significant headwind for the market.”

Production also started to come back after Hurricane Zeta, a Category 2 storm, made landfall Wednesday near Cocodrie, LA.

Genscape Inc. said Friday its Gulf of Mexico production sample was up 362 MMcf/d day/day to 690 MMcf/d, though down from the month’s high of 2.05 Bcf/d as several pipelines in the offshore were still preparing to bring facilities back online after precautionary shut-ins earlier in the week as Zeta approached.

“It is worth noting that there is a system currently in the Eastern Caribbean with a 60% chance of turning into a tropical depression within the next five days as it moves into the Western Caribbean,” the firm said.

Based on 42 reports filed with the Bureau of Safety and Environmental Enforcement at midday Friday, 40% of the total gas production in the GOM remained shut-in. 

Robust LNG demand ahead of winter, however, more than offset the weather worries. Volumes approached 10.0 Bcf Friday after climbing above 9.5 Bcf/d a day earlier, led by rising output at Sabine Pass — 4.1 Bcf/d — and a gain of nearly 1.5 Bcf/d at Cameron, according to EBW Analytics Group.

EBW CEO Andy Weissman said over the coming weeks, LNG could advance another 1.5 Bcf/d. He said the increase could come if the Freeport terminal is cleared by the Federal Energy Regulatory Commission to restart operations at Train 1 following an on-site fire earlier in October and if the U.S. Navy clears a barge from the Calcasieu Ship Channel that has restricted cargo loadings.

“If the entire U.S. LNG fleet operates at demonstrated maximum capacity — including on-site gas consumption in addition to exported volumes — feed gas demand may exceed 11.5 Bcf/d by mid-winter,” Weissman said.   

The latest Energy Information Administration (EIA) storage report, released Thursday, added to the market’s bullish sentiment. It showed a smaller-than-expected 29 Bcf injection. Ahead of the report, major surveys had reached a consensus of a build in the upper 30s Bcf. Total working gas in storage as of Oct. 23 rose to 3,955 Bcf. That was 285 Bcf above year-earlier levels but down notably from the start of October, according to EIA.

Analysts at Tudor, Pickering, Holt & Co. (TPH) said they expect the latest injection to mark the last of 2020. Based on that assumption, analysts said cumulative injections this year totaled 1,969 Bcf, or 21% below 2019 levels, affected largely by a hot summer and prolonged stretches of strong cooling demand.

As for the current week, the TPH analysts added, cold weather in the Rockies region is fueling heating demand, and power burn “is also running well above norms, as weak local pricing in the Northeast continues to favor gas over coal for power generation…As local pricing picks up, we’ll be closely monitoring fuel switching as, outside of weather, we see this being the dominant storyline through the winter.”

Cash Prices

Spot gas prices sputtered Friday along with the forecasts for comfortable temperatures.

After a short-term freeze to start November in parts of the Midwest and East, temperatures were forecast to warm into the 50s to 80s across much of the country, NatGasWeather said. “The Northeast will warm into the 50s and 60s” as the first week of November progresses, limiting heating needs in an important demand region.

Prices in the Northeast, where several hubs posted steep drops, drove down the national average. Tenn Zone 6 200L North prices dropped $2.560 day/day to an average $4.700, while PNGTS lost $2.980 to $4.290.

On the pipeline front, Genscape noted that Millennium declared a force majeure on Thursday after an unplanned outage at its Hancock compressor station in Delaware County in NY. As a result, the firm said, capacity through the Wagoner West throughput meter in Orange County, NY, was expected to be reduced to 1144 MMcf/d starting Saturday.

That would represent a 73 MMcf/d cut in capacity compared to its standard.

“Flows through Wagoner West have averaged 983 MMcf/d over the last 14 days but have ramped up recently in light of incoming cold weather,” Genscape said. “This constraint may cause slight bullish pressure” on Algonquin Citygate prices. As of Friday, there was no estimated date for a return to service.  

Algonquin Citygate next-day prices on Friday, however, dropped $2.925 to $3.610.  

Elsewhere, Dominion North fell 50.5 cents to $1.325, while PG&E Citygate shed 23.5 cents to $3.835, and Kern River lost 20.0 cents to $2.935.