- LNG feed gas volumes hold above 11 Bcf
- Forecasts call for diminished heating demand
- Cash prices mixed across Lower 48
Just as a rally started to mount, natural gas futures stumbled on Tuesday and dashed hopes for a three-day winning streak. Strong liquefied natural gas (LNG) levels had propelled the prompt month over the two prior trading sessions, but continued forecasts for weak domestic weather demand curbed the momentum.
The April Nymex contract shed 7.4 cents day/day and settled at $2.508/MMBtu Tuesday. May fell 6.5 cents to $2.554.
NGI’s Spot Gas National Avg. inched ahead 1.0 cent to $2.320.
LNG feed gas volumes hovered close to 12 Bcf/d late last week – around record levels — and have held comfortably above 11 Bcf this week, thanks in part to strengthening European demand for U.S. exports.
This strength is linked to “declines in European storage, suggesting that U.S. injection-season LNG exports are likely to be strong — tightening the market later this year,” EBW Analytics Group said.
The LNG demand also reflects confidence in coronavirus vaccination programs and that “economic shut-ins are increasingly unlikely,” the EBW team said. Still, “LNG demand may remain subject to temporary reductions due to maintenance or tropical storms.”
Jefferies Financial Group Inc. analysts noted mounting confidence and massive government stimulus programs that could fuel economic activity and energy demand from the commercial and industrial sectors this year. They noted the $1.9 trillion spending bill recently signed by President Biden that directs payments to most American households and funds inoculation programs.
However, “there are other tributaries leading to the spending river,” they added. These include an expected uplift in discretionary spending as consumer confidence rebounds, rising capital expenditures among global corporations, and increased dividend payouts and share buybacks. They also noted that the Biden administration had floated a $3 trillion government spending plan on U.S. infrastructure.
For all the potential catalysts, however, both the European and domestic weather models on Tuesday showed “emphatically bearish” conditions in terms of domestic natural gas demand for the remainder of March and into April, NatGasWeather said.
Both models projected more than 40 heating-degree days (HDD) warmer than normal for the coming 15 days. The pattern “is likely to carry over to days 16-20 as well,” the forecaster said.
“Weather systems will bring showers to many areas of the U.S. March 30-April 1 for near normal temperatures and demand,” NatGasWeather added. “However, upper high pressure will expand to rule much of the U.S. April 2-5 with comfortable highs of 60s to 80s and a return to very light national demand.”
Looking ahead to Thursday’s storage report from the U.S. Energy Information Administration (EIA), meanwhile, NGI modeled a 17 Bcf withdrawal for the week ended March 19. That would compare with a 26 Bcf draw recorded in the year-ago period and a five-year average 51 Bcf pull.
Energy Aspects issued a preliminary estimate for a 10 Bcf withdrawal for the upcoming report. The firm modeled no change week/week in HDDs, though it noted LNG feed gas demand increased an estimated 0.6 Bcf/d for the week.
A preliminary Bloomberg survey landed at a median estimate for a 25 Bcf pull from stocks, with forecasts ranging from withdrawals of 17 Bcf to 33 Bcf.
Spot Prices Mixed
Next-day cash prices varied Tuesday as mild weather permeated much of the Lower 48.
One weather system brought showers to the Midwest and Great Lakes Tuesday, while a second tracked into the Southwest and a third arrived in the Northwest, NatGasWeather said. However, those systems were “quite mild with highs of 40s to 60s.”
For the rest of the week, the firm added, “national demand will remain light” as highs of 60s to lower 80s span the southern and eastern United States and above average highs of 50s and 60s stretch from Chicago to New York City.
“There will be locally cool conditions over the interior West into the Plains as weather systems bring showers, although still rather mild with highs of 40s to 60s,” NatGasWeather added. “There will be a modest bump in demand late this weekend into nearly next week as weather systems over the west-central U.S. have greater success advancing eastward.” Still, any demand momentum is expected to fade by early April.
Against that backdrop, spot prices moved modestly with a mix of gains and losses across several regions.
On the pipeline front, Columbia Gas Transmission launched a pigging event on Tuesday that it expected to finish on Friday. Wood Mackenzie analyst Nicole McMurrer noted that flows through the Louisa MA33 stations in Virginia were down an estimated 91 MMcf/d to 177 MMcf/d on Tuesday as a result of the project.
Separately, Rockies Express began work on the St. Paul Compressor Station in south-central Illinois on Tuesday. Work was expected to wrap up on Saturday. McMurrer noted that, according to the pipeline’s notice, operating capacity would be limited through Segment 350. Flows through the segment Tuesday were down from 2.470 Bcf/d to 2.185 Bcf/d, and operating capacity fell from 2.677 Bcf/d to 2.281 Bcf/d.
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