• BREAKING: U.S. EIA reports a 49 Bcf injection into natural gas storage inventories for the week ending Oct. 16, confirming an increasingly tight supply/demand natural gas balance
  • November natural gas climbs 11 cents as LNG demand surpasses 8 Bcf

Natural gas traders may have had the theme of 1980s sitcom “Three’s Company” playing in their heads Wednesday as they knocked on the door of $3.00/MMBtu gas. With the resumption of maximum exports imminent and weather models adding more demand, they got the job done. The November Nymex futures contract settled 11.0 cents higher at $3.023. December jumped 8.8 cents to $3.348.

EIA storage Oct 18

Spot gas prices also continued to climb across most of the country, but stronger declines on the East Coast kept NGI’s Spot Gas National Avg. flat at $2.455.

With confidence growing that liquefied natural gas (LNG) exports would soon reach their full potential in spite of ongoing issues in two Gulf Coast waterways, futures traders wasted no time in making a run at the coveted $3.00 threshold.

The November Nymex contract opened Wednesday’s session at $2.897 and quickly jumped from there. The prompt-month reached the $3.053 intraday high early and eventually went on to settle near the top end of its 16-cent range. Four months ago on June 26, the prompt month settled at a 25-year low of $1.432.

The U.S. Coast Guard (USCG) said although the Jasmina oil rig remained stationary in the Sabine Bank Channel, test runs of two vessels with draft depths of 36.6 feet and 36.8 feet “were successful.” The captain of the port (COTP), in consultation with the Sabine pilots, subsequently approved moving vessels with drafts of 36 feet or less, day or night, with a positive one-foot tide. The COTP would consider transit requests exceeding the 36-foot limitation on a case-by-case basis after consulting with the pilots and vessel master, according to the USCG.

Meanwhile, as of Wednesday morning, the LNG vessel Golar Seal was berthed at Cameron LNG’s loading dock, according to ClipperData. The last loading from the terminal was on Oct. 5, via LNG vessel SK Audace. Feed gas flow has been steadily increasing to the facility, with Wednesday’s nominations rising to 1.09 Bcf. NGI data showed total feed gas deliveries jumping more than 600,000 Mcf day/day to 8.6 Bcf.

“There are still some issues to contend with regarding removal of the sunken barge near Cameron, but there does not seem to be much material impact to LNG, overall,” said Bespoke Weather Services.

EBW Analytics Group said the key question facing the market for the past several weeks has been charting a path to reach the end of the oversupplied 2020 injection season and the undersupplied November 2020-October 2021 annual storage cycle.

Although questions remain, as evidenced by the massive 32.5-centspread between the November and December contracts, the potential for small daily withdrawals to begin as soon as next week may help natural gas price momentum continue higher.

Mother Nature appears to be willing to do her part. Bespoke said the overnight models  reversed the warmer trends in Tuesday’s midday cycle, adding another 7.5 gas-weighted degree days to the 15-day forecast. The forecaster noted that the 15-day period as a whole is not far off from what was seen on the same dates last year in terms of total demand, “which is rather impressive.

“Also similar to last year, the cold is strongest back in the middle of the nation, though does spill into the eastern U.S. at the end of the month and into the opening days of November,” Bespoke said.

Models still show no blocking at all on the Atlantic side in the medium range, and hint at more Pacific flow as well, courtesy of the La Niña state trying to exert more influence once again, according to Bespoke. This should finally allow for a warmer transition down the road, but timing keeps getting pushed back, keeping confidence below average.

NatGasWeather said the midday Global Forecast System (GFS) data was again a little colder for next week, but trended warmer for Oct. 29-Nov. 2 by showing a little less cold air into the Midwest but still chilly over the Northeast. The forecaster said the latest model run also pointed to a more seasonal pattern for Nov. 2-4. Overall, the latest GFS gave back around five heating degree days (HDD) compared to the overnight run, but maintained the chilly pattern for next week into the following weekend.

Nevertheless, the December contract’s sizable premium to the November contract pointed to the risk of increased volatility through expiration, according to EBW. “Even beyond expiration, it is possible that the rollover gap higher will again cause market volatility, as occurred during the rollover last month when the November contract lost 37 cents in the first four trading sessions as the front-month contract.”

Analysts at The Schork Group noted this week that since the summer, hedge funds have “poured a lot of money” into the Nymex gas market and now hold one of their most bullish positions ever. “In this respect, we felt that the table was set for a lot of fireworks.”

Even after Tuesday’s climb to the highest settlement since January 2019, Schork analysts believed the rally had staying power. With the November contract now taking out $3.00, “we figure that this fireworks show will last through winter.”

Another Small Build

How the storage situation shapes up in the weeks ahead may still cause some price fluctuations, though, especially with inventories in the South Central region nearing capacity.

The U.S. Energy Information Administration (EIA) is scheduled to release its weekly storage inventory report at 10:30 a.m Thursday. Analysts on Wednesday were expecting another below-average injection for the week ending Oct. 16.

A Bloomberg survey of eight analysts estimated injections to range from 46 Bcf to 56 Bcf, with a median build of 52 Bcf. Reuters polled 14 analysts, whose estimates ranged from increases of 42 Bcf to 56 Bcf, with a median injection of 52 Bcf. The Wall Street Journal surveyed 12 analysts whose estimates fell within that same range, but arrived at a median build of 52 Bcf. NGI’s model also projected 52 Bcf.

NatGasWeather said Thursday’s build is likely to be slightly larger than last week’s because of fewer degree days for the reference week. The firm said the last EIA report marked the peak of the fall shoulder season per the five-year average. It said build sizes typically decrease in the weeks ahead as heating demand ramps up on climatologically cooler temperatures into the northern United States.

The EIA recorded a 92 Bcf injection for the same week last year, while the five-year average stands at 75 Bcf. Total working gas in storage as of Oct. 9 stood at 3,877 Bcf, 388 Bcf higher than last year at this time and 353 Bcf above the five-year average.

East Cash Crumbles

Though the majority of spot gas markets across the Lower 48 continued to climb midweek, prices farther east fell hard. The big losses occurred as the only chilly weather currently circulating through the country was in the lower population areas of the northern Rockies and northern Plains.

NatGasWeather said most areas continue to experience “comfortable” daytime temperatures in the 60s to 80s, though some hotter weather was seen continuing in the Southwest. The forecaster said cold air remains on track to release across the Midwest/central United States this weekend, then over the Great Lakes and Ohio Valley early next week.

“It’s this cold shot fanning out to cover greater territory next week where numerous HDDs were added” to recent weather model runs, NatGasWeather said.

Until then, prices were heading lower in the region. Transco Zone 6 NY spot gas plunged 57.5 cents to average only 90.5 cents for Thursday’s gas delivery. Farther upstream, Columbia Gas tumbled $1.125 to average 99.0 cents.

Prices were much stronger in the Southeast, taking on as much as 10.0 cents day/day and averaging well over $2.00 at most hubs. The exception was Dominion Energy Cove Point, which dropped $1.005 to $1.210.

Henry Hub cash climbed another 27.5 cents to $2.860, moving into greater alignment with the prompt-month Nymex futures contract.

Prices in the Midwest barely moved, with Chicago Citygate edging up a half-cent to $2.720.

Texas spot gas prices were on the rise, but gains were mostly limited to less than a dime or so. West Texas posted stronger increases. Waha jumped 72.0 cents to average 88.5 cents for Thursday’s gas day.