Cooler temperatures and soft demand in the natural gas cash market, along with ongoing liquefied natural gas (LNG) woes, weighed down futures again Tuesday, with prices hitting a new daily low in June for a third consecutive trading day.
The July natural gas Nymex contract dipped 5.5 cents day/day and settled at $1.614/MMBtu. August declined 5.9 cents to $1.701.
NGI’s Spot Gas National Avg. declined 5.0 cents to $1.365.
Summer heat has settled in across the southern Plains and much of the Southwest. However, “a stalled weather system over the East this week, followed by a new system arriving into the Midwest and east-central U.S. late this weekend and next week” translates into “a bearish pattern” through next week, NatGasWeather said.
The firm anticipated “lighter-than-normal demand” as the pattern “brings widespread showers and highs in the 60s and 70s” to swaths of the eastern half of the country. “We continue to look to June 26-30 as the next opportunity for more ominous widespread heat to arrive but with more evidence needed.”
Absent a near-term weather catalyst, supply/demand concerns are intensifying as associated gas production begins to return while industrial energy use is still modest, and as LNG export levels remain subdued. European and Asian demand for U.S. imports is stubbornly low as economies on both continents are only beginning to reopen from virus-imposed lockdowns.
“As the production seeps back into the pipeline grid, the market is also contending with severely deflated feed gas volumes into LNG terminals — a phenomenon that is not expected to change at any point in the coming weeks,” Energy Aspects researchers said in a report Tuesday. “Market fundamentals are shaping up to be supply heavy.”
EBW Analytics Group said declines this week are “mostly due to extremely weak near-term cash market demand” because power sector demand is “currently far below normal.”
EBW and others, however, say forecasts call for more heat later this month and a relatively hot summer overall that should drive more energy use, bolster cash prices and serve as an impetus for gas futures.
Bespoke Weather Services anticipates gas-weighted degree day (GWDD) totals for June will prove strong overall.
“Our projected 15-day GWDD total still runs near to slightly above normal levels, keeping us on pace for a hotter than normal June. As the global pattern dives more into La Niña mode, the balance of summer should continue to run hotter more often than not,” the firm said.
“Should stronger heat return to the forecast, that could be enough to serve as a slightly bullish catalyst, while the main risk to the bearish side, in our view, is the possible virus resurgence, as that could make it much more difficult for the demand side to compensate for low LNG,” Bespoke added.
Data for May painted a mixed recovery picture and, according to Federal Reserve Bank Chairman Jerome Powell. He said Tuesday that the domestic economy remains vulnerable to a resurgence of the virus.
Employers added jobs in May and consumers started to shop again, lifting retail sales nearly 18% last month. Still, the jobless rate still exceeds 13%, and consumer spending remains well below pre-pandemic levels. The outlook, Powell said, is highly uncertain.
“The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures,” he said during webcast testimony before members of a Senate committee.
“Until the public is confident that the disease is contained, a full recovery is unlikely,” Powell added.
The cooler near-term weather conditions weighed down spot gas prices across much of the country, except for the Appalachia and Northeast regions.
In pipeline news, Cheniere’s Creole Trail Pipeline gave notice Monday of an unplanned pigging operation at its Gillis Compressor Station. The work is expected to reduce pipeline operational capacity to 582 MMcf/d for Tuesday and Wednesday, according to Genscape Inc. While the operation “represents a significant curtailment to operational capacity, no flow impacts are anticipated due to depressed feed gas demand at Sabine Pass liquefaction facilities,” the firm said.
Since May 31, deliveries to Sabine Pass facilities from Creole Trail Pipeline have declined from highs of 830 MMcf/d to around 500 MMcf/d, Genscape noted.
Also on Monday, Columbia Gulf Transmission said maintenance work on Mainline 200 and Mainline 300 previously scheduled for culmination Tuesday had been extended through Wednesday.
“While no further declines in scheduled capacity are anticipated as a result of this extension, flows out of Tennessee have been reduced by nearly 240 MMcf/d since last week’s force majeure was declared,” Genscape said Tuesday. “Upon completion of this ongoing maintenance, backhaul capacity will resume to near 2.2 Bcf/d.”
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