After having some impact on cash deals done on Thursday, the bearish natural gas storage report and the resulting decline natural gas futures values helped lead the cash market to no change or lower on Friday at all U.S. points. A few Canadian points ticked higher a couple of pennies, potentially due to the outage of the Sable Offshore Energy Project.
Immediately following Thursday morning’s report from the Energy Information Administration that 83 Bcf had been injected underground for the week ending April 30, natural gas futures values lurched lower and cash traders took notice (see Daily GPI, May 7). June futures ended up closing Thursday at $3.929, down 6.2 cents from Wednesday’s finish. The cash market on Monday might have a little pep in its step after the June contract finished 8.6 cents higher Friday.
The bearish momentum carried over into Friday’s cash market as a majority of points across the United States dropped up to a dime. In the East, the largest drop Friday for weekend and Monday delivery was Dominion-South, which shaved 10.61 cents according to IntercontinentalExchange (ICE).
In Arizona, Nevada and in the Rockies, the declines were a little more severe, according to NGI‘s numbers. Kern Delivery and Opal dropped 12 cents while El Paso South Mainline came off 14 cents.
On e Northeast trader said while they weren’t in the market much on Friday, they were dealing with the shutdown of the Sable offshore project for planned maintenance. “We’ve been trying to get supply worked out with Sable going offline,” said a Northeast utility trader. “Generally speaking, we haven’t seen dissimilar price action to what we’ve been seeing recently. Since we are in the shoulder season, the market really has been moving in fairly small increments back and forth. A ‘greater direction’ has not materialized.”
Despite Sable being shutdown until Tuesday, Bentek Energy analyst Rocco Canonica said only a little upward price pressure could be put on Dracut and Algonquin Citygate. Because it is only scheduled to be down a couple of days and the region has liquefied natural gas (LNG) flexibility, he noted that it likely won’t be that big of a burden. “With all of the LNG available in the Northeast, downward pressure is being applied on the premium in Northeast markets,” Canonica told NGI. “We expect that to continue with the Marcellus Shale growth and all of those new pipelines that are going to alleviate the constraints that separate Ohio from the premium markets of the East. Those premium basis levels are just going to be crushed over the next few years.”
Canonica said in the Northeast it looks like the United States is bringing in more LNG and shipping other gas back across the border. “The Baileyville Border receipt has flipped and is now a net export to Canada to the tune of 157 MMcf/d,” he said. “On the other hand, receipts at Brunswick from the Canaport LNG terminal are at 290 MMcf/d, which is up 112 MMcf/d from Thursday.”
He said the current snapshot for summer natural gas prices is “pretty bearish,” barring anything major occurring. However, even if a major hurricane were to touch down in the Gulf of Mexico, “we don’t expect huge price increases like we saw in the past because of the current ability of producers to respond with quick production coming online from the shale plays. We expect storage to be at record highs basically throughout this injection season, leading to record levels of storage entering the winter heating season. We see prices remaining around $4 this month and next; then get weaker as the injection season moves on.”
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