Natural gas futures dipped even lower Monday after posting a double-digit decline to close out the prior week, as weather-driven demand was forecast to fade and the October contract rolled off the board. Futures dropped early, swung back into positive territory by early afternoon and then dropped again to finish in the red.
The October Nymex contract settled at $2.101/MMBtu, down 3.8 cents day/day. It lost nearly 11 cents last Friday, culminating a week of big price swings. November, which becomes the prompt month with Tuesday’s trading session, shed 1.2 cents to $2.795.
Spot gas prices ticked up along with near-term heat in the West and a rebound in prices in the Northeast. NGI’s Spot Gas National Avg. rose 9.0 cents to $1.710.
“Just another volatile day, as expected, especially with October futures expiring at the close,” NatGasWeather said.
The forecaster said the current week’s weather forecasts call for cooler temperatures in the East – with potential heating demand – and ongoing lofty temperatures in the West, where cooling demand should continue. But the firm said the first full week of October could usher in more comfortable temperatures and lighter overall demand.
NatGasWeather said systems that tracked into the central U.S. Monday with showers and highs of 50s and 60s would move into the East by midweek, bringing highs in the 60s and 70s. “Comfortable highs of 70s and 80s will rule the East Monday ahead of this system, while the West becomes very warm with highs of 80s and 90s, locally 100s California and Southwest” early this week, the firm said. “A stronger cold shot will push into the Great Lakes and Northeast,” with lows in the 30s and 40s by the weekend.
“This cool East, hot West pattern is expected to last through the weekend,” NatGasWeather said. However, it is to be followed “by a more bearish U.S. pattern after” with national total degree days “near or below normal for a bearish lean.”
NatGasWeather also said liquefied natural gas (LNG) volumes ticked down slightly Monday, to 6.3 Bcf from about 6.5 Bcf over the weekend, and likely motivated some of Monday’s selling.
By afternoon trading, Sempra Energy had confirmed that its Cameron LNG export facility in Louisiana had begun the process of restarting, a month after its operations were forced offline amid power outages caused by Hurricane Laura. Cameron’s return could boost LNG feed gas levels in October.
“While Cameron has started to receive trace amounts of natural gas…feed gas flows at Sabine Pass have been reduced due to pipeline maintenance, and natural gas production has rebounded modestly,” EBW Analytics Group said, explaining the downward pressure on markets Monday. “By later this week, however, demand is likely to increase due to colder weather and increased LNG feed gas flows,” potentially providing a lift to the November contract.
Cameron aside, LNG volumes fell early last week when Tropical Storm Beta interrupted feed gas flows to Gulf Coast terminals. After approaching 8.0 Bcf earlier in September, LNG volumes fell below 4.0 Bcf last Tuesday. But as Beta’s impact subsided, LNG levels climbed back above 4.0 Bcf Wednesday and exceeded 6.0 Bcf by Friday.
However, a sustained LNG recovery is not a sure thing. Future tropical storms or hurricanes are wild cards, of course, and LNG exporters still need to see stronger demand from Asia and Europe ahead of winter. That demand increase is partly dependent on continued economic recovery – and increases in energy needs that would accompany it – as countries overseas adapt to life with the coronavirus pandemic this fall.
Additionally, production was lower last week in part because of Beta and aftershocks from other tropical storms in the Gulf of Mexico (GOM) and in part because of maintenance work elsewhere. But production was expected to recover this week, at least in the GOM, amid near-term forecasts showing relative calm in the tropics.
Spot gas prices advanced on Monday along with the near-term demand expected from cold blasts in the East and continued heat in the West.
“We do still have a healthy cool shot this week, relative to time of year,” Bespoke Weather Services said.
Prices in the Northeast and Texas helped drive the upward momentum, as production, while recovering, remained below normal following Beta. Additionally, both maintenance and curtailments have limited supply to key East Coast markets.
While heat is expected to persist in California and the Southwest, Bespoke said that, with relatively mild conditions in the South and cooling across the Midwest and East, September is on track to finish with the lowest gas-weighted degree day total of any September since 2009. The firm also projected that October’s total will “wind up significantly less than the last couple of years, at the least.”
Bespoke said gas prices could face more pressure as a result.
The “picture for winter still looks bullish,” but “we will soon have to consider weather as well, which may not be very helpful to bulls over the next several weeks,” the firm said.
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