Natural gas futures were trading sharply higher early Tuesday following reports of a pipeline explosion in Kentucky late Monday afternoon, an event that raises the prospect of prolonged supply disruptions. The June Nymex contract was up 10.9 cents to $2.102/MMBtu at around 8:30 a.m. ET.
Local news outlets Monday reported a pipeline explosion in Fleming County, KY; no injuries were reported.
Genscape Inc. said the explosion occurred on Texas Eastern Transmission Co.’s (Tetco) 30-inch diameter system north of its Owingsville, KY, compressor on Line 10. Tetco declared a force majeure late Monday advising shippers of an “unplanned outage” in this area and an indefinite restoration timeline.
“This is also just upstream of Tetco’s last explosion in August 2019 near Danville, KY, on Line 15,” Genscape analyst Josh Garcia said in a note to clients early Tuesday. “As a result, north to south capacity through Owingsville will be reduced from 1.33 Bcf/d to zero beginning on gas day May 5 and will last for the immediate future.
“Flows through this compressor were at or above capacity for the majority of the month prior to the explosion…This outage will add bearish pressure” on prices in Tetco’s M-2 zone “as one of its main export lines is severely constrained, which will force reroutes in the region and possibly cause shut-ins.”
Meanwhile, the latest weather data showed only minor changes, maintaining recent cooler trends and heating degree day (HDD) gains through the middle of next week, according to NatGasWeather.
“While the pattern into early next week maintains solidly above normal HDD totals, May 13-18 is still forecast to be quite comfortable across the northern U.S., while heat will be confined to the Southwest and West Texas,” the forecaster said. “As such, the 10-15 day forecast remains not hot or cold enough.
“…For today’s trade, we look to see if the evening spike due to the Kentucky pipeline explosion holds. Clearly, decreasing natural gas production has been bullish, but Covid-19 demand destruction” and canceled liquefied natural gas export cargoes have been bearish. “We view weather patterns as bullish-biased through mid-next week, then neutral to bearish after.”
June crude oil futures were up $2.59 to $22.98/bbl at around 8:30 a.m. ET, while June RBOB gasoline was trading about 5.5 cents higher at around 87.7 cents/gal.
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