Natural gas futures faltered for a fourth-consecutive day to end the week, with weakened weather demand expectations and lower U.S. export levels overshadowing a government inventory report that showed the steepest withdrawal of the season.
The February Nymex gas futures contract settled at $2.446, down 4.5 cents day/day. March shed 4.1 cents to $2.456.
NGI’s Spot Gas National Avg., meanwhile, posted its first gain of the week, advancing 9.0 cents to $2.640.
After the Global Forecast System (GFS) backed off of cold expectations earlier in the week, the European model followed suit overnight Thursday, disappointing markets.
The outlook “is now quite bearish” for the week ahead, NatGasWeather said. The firm noted that forecasts earlier in the month had called for extreme cold across much of the country late in January and into the first week of February. However, expectations for the duration and breadth of the winter chill have since been scaled back substantially.
“There’s still expected to be strong national demand over the next week as a couple cold shots sweep across the northern and eastern U.S.,” NatGasWeather said. However, the forecast for days 10 through 15 of the outlook period suggests “national demand will return to lighter than normal levels for early February.” The firm said conditions early next month now look “exceptionally mild,” with upper high pressure expanding to produce “widespread” highs of 40s to 70s.
U.S. liquefied natural gas (LNG) volumes, meanwhile, remained subdued Friday, hovering near 9 Bcf after exceeding 11 Bcf a week earlier.
“LNG feed gas demand has stumbled in recent days,” EBW Analytics Group said, with notable declines at Cheniere Energy Inc.’s Sabine Pass LNG facility.
“It appears that heavy fog has impeded waterway navigation, leading Cheniere to pull scheduled pipeline maintenance forward. As a result, the subdued LNG demand may last into next week before rebounding — potentially leading to the loss of 10-15 Bcf of natural gas demand for the balance of January,” EBW said.
The firm noted that, while not as cold as once anticipated, the week is still likely to produce the lowest temperatures of the season as the LNG delays persist. “Likely lower LNG demand could sap spot market strength as weather-driven demand reaches its annual peak — limiting upside potential unless weather models shift sharply colder.”
Meanwhile, the U.S. Energy Information Administration (EIA) on Friday reported a withdrawal of 187 Bcf from natural gas storage for the week ending Jan. 15. The result exceeded expectations but fell short of galvanizing optimism in futures.
Prior to the report, a Bloomberg survey landed at a median expectation for pull of 175 Bcf, while a Reuters poll found respondents predicting a median decrease of 178 Bcf. NGI’s model predicted a 191 Bcf withdrawal.
Bespoke Weather Services called the latest EIA result a “very strong draw” that reflected “a very tight supply/demand balance.” However, the firm added, “that looks to be temporary…As a result, we see no price reaction to the upside from this number, other than a very brief bump up that was quickly sold.”
During the latest covered week, it was colder than normal over Texas and the South as a weather system tracked through with chilly rains and flashes of snow. LNG export levels were also strong – near or above 11 Bcf throughout the week.
The South Central withdrawal of 75 Bcf led all others and included a 44 Bcf pull from nonsalt facilities and a 31 Bcf pull from salts. The overall pull decreased inventories to 3,009 Bcf, though they held above the year-earlier level of 2,973 Bcf and the five-year average of 2,811 Bcf.
Looking ahead to the next storage report – covering the week ended Jan. 22 — analysts are generally expecting another triple-digit withdrawal. But early estimates point to a lighter pull in the 130s Bcf because of mild temperatures across much of the northern United States and the decline in LNG feed gas flows.
“We still need to see weather back away from the big warm look in order to get anything going to the upside,” Bespoke said.
Spot gas prices advanced for the first time all week on Friday, as mild weather conditions shifted cooler in the Midwest and East. Near-term forecasts called for low temperatures to drop into the teens over both regions over the weekend.
“Cool to cold conditions will spread across the northern U.S.,” with highs in the 20s to 40s and lows of 0s to 30s for stronger national demand,” NatGasWeather said.
“The West will be cool and unsettled” through the final week of January “with areas of rain and snow and highs of 20s to 50s,” the firm added. “After a brief break Monday across the Midwest and East, another chilly cold shot will arrive mid-next week with lows of 0s to 30s for a swing back to stronger national demand.”
Hubs in the volatile Northeast posted robust gains Friday, but several other regions recorded modest declines.
A few hubs in the West also notched notable gains, with SoCal Citygate up 39.0 cents to $3.425.
Prices were mostly lower across Texas as well. El Paso Permian was an exception. The hub gained 2.0 cents to $2.335.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |