Mirroring gains in equities as markets looked to lawmakers for economic relief in the face of the coronavirus pandemic, natural gas futures rallied Tuesday. The April Nymex contract settled at $1.653/MMBtu, up 5.1 cents on the day.
In the spot market, Northeast hubs led a wave of modest gains for most regions, nudging NGI’s Spot Gas National Avg. 3.0 cents higher to $1.475.
EBW Analytics Group analysts said prices have found support this week on a combination of “hopes that Congress will pass a multi-trillion dollar stimulus package” and “statements by President Trump suggesting that he might urge states to reopen the economy.”
Still, even with Congress nearing a deal to pass measures to ease the economic impact of the virus, natural gas demand is “dropping rapidly,” suggesting the move higher could be temporary, according to EBW. “Further, even if President Trump orders” the Centers for Disease Control and Prevention to “modify federal guidance, the authority to lift restrictions rests with state governors, who are unlikely to back down given the risks to public health.”
The supply/demand balance has tightened in recent days, which likely also helped to support prices Tuesday, according to NatGasWeather.
“Weather patterns remain to the bearish side, with only weak cool shots expected into the U.S. through the first week of April, while quite comfortable most elsewhere,” the forecaster said, adding that the midday Global Forecast System run advertised “offsetting” shifts in the outlook, including cooler trends for early next week across the East and milder trends during the first week of April.
Meanwhile, Energy Aspects said recently that it is projecting an end-March storage carryout of 2.0 Tcf.
“End-March inventories are subject to even greater demand risks than usual, which are increasing as unknowns continue to mount for the weeks at the end of the traditional withdrawal season and beyond,” the firm said. “…The widespread closure in the U.S. of schools, offices and social spaces including restaurants and bars will impact commercial gas use, but we assume this loss in the very near term will be offset by a similar gain in residential use as workers operate remotely or stay at home.”
The United States is not the only country taking steps to contain the spread of Covid-19, with other countries, including Europe, implementing their own social distancing measures, Energy Aspects noted.
“Our European balances are currently pointing to an end-March year/year storage surplus of near 475 Bcf,” the firm said. “In addition, we expect that Europe will face” liquefied natural gas (LNG) “unloading congestion in the coming weeks. This could translate into longer waiting than usual for available unloading slots as well as demurrage fees adding to logistics costs.
“These matters underscore potential issues with the typical pace of feed gas flow into U.S. facilities that we have seen under more normal operating conditions.”
While the pandemic threatens the demand side of the market, production in the Lower 48 has been strong, with gains in the Permian Basin and in Appalachia leading to a 0.8-0.9 Bcf/d week/week increase last week, according to Energy Aspects estimates.
“Moving forward, a concern is how Covid-19 could potentially impact completion activity, and the related impact to production, as reductions to manpower at factories have already been heard,” the firm said.
Still, feed gas deliveries to U.S. LNG terminals have shown signs of recovering in recent days after slumping to as low as 6.94 million Dth/d last week. NGI’s U.S. LNG Export Tracker showed feed gas deliveries totaling 8.58 million Dth/d Tuesday, down about 300,000 Dth day/day.
The day/day drop could be the result of a one-day maintenance event Tuesday due to an unplanned outage on the Creole Trail Pipeline’s Gillis Compressor Station.
“While this maintenance event is short-lived and will be completed by end-of-day, operating capacity will be restricted to 1.2 Bcf/d and will potentially reduce up to 0.3 Bcf/d of feed gas deliveries to Sabine Pass liquefaction facilities,” Genscape Inc. analyst Preston Durham told clients Tuesday. “Feed gas deliveries to LNG terminals have significantly rebounded in recent days, with a notable increase in deliveries to Sabine Pass.
“Feed gas deliveries to Sabine Pass specifically from Creole Trail have nearly doubled week/week from 0.8 Bcf/d to 1.5 Bcf/d.”
Spot prices worked higher across most regions in Tuesday’s trading; the sharpest gains occurred in the Northeast, where forecasts showed seasonably chilly — but not especially frigid — temperatures lingering over the next few days.
Maxar’s Weather Desk called for population centers along the Interstate 95 corridor to experience near to below-normal conditions through Thursday, including average temperatures in the low- to mid-40s in Boston and New York City.
Elsewhere, locations throughout the Gulf Coast, Southeast and Midwest saw gains of around a nickel to a dime, paced by a 7.0-cent increase for benchmark Henry Hub.
Genscape’s estimates as of Tuesday called for demand to drop off over the next week. The firm estimated that the next seven days would average 4.6 Bcf/d less demand versus the prior seven days.
“Demand projects lower on a combination of the destructive impact of coronavirus plus weather forecasts showing unseasonably mild conditions across most of the U.S.,” Genscape senior natural gas analyst Rick Margolin said. “For the upcoming seven days, we project demand to average about 81.5 Bcf/d,” peaking at 86 Bcf/d Wednesday before dropping down to 76.5 Bcf/d this weekend.
“Demand may have projected lower except for the potential for cooling loads to kick in in the Southeast, Gulf Coast and Texas markets, along with some heating load with another round of cold moving into the West Coast.”
Below-normal temperatures forecast along the West Coast barely registered in the spot market Tuesday, as hubs throughout the region saw a mix of adjustments. Northwest Sumas added a half-cent to average $1.480, while farther south Malin picked up 4.5 cents to $1.500. Elsewhere in California, SoCal Border Avg. added 4.0 cents to $1.570.
The National Weather Service on Tuesday was calling for a “showery pattern” to accompany “well below-average” temperatures through midweek from the West Coast into the Great Basin and northern Rockies.
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