Natural gas futures were slightly lower but still range bound to finish the week as the July Nymex contract swung in a less than 10-cent band before settling Friday at $1.782, off 4.0 cents day/day. August was down 3.1 cents to $1.886.

PM Markets

Spot gas prices also declined as Tropical Storm Cristobal headed toward the Gulf Coast, with winds and heavy rains from the storm seen slashing demand, but not threatening oil and gas operations. NGI’s Spot Gas National Avg. fell 11.0 cents to $1.555.

[NGI’s natural gas price indexes have included trade data from both price reporters and the Intercontinental Exchange (ICE) since 2008]

Not much changed overnight in the background state for natural gas, with weather models still showing “a very warm pattern” into the second week of June, pushing power burns to a relatively strong 35-37 Bcf/d, according to NatGasWeather. However, the June 11-17 pattern isn’t hot enough except across the Southwest and Texas as weather systems track across the northern and eastern United States, the firm said.

The June 18-21 period is now the period of greatest interest to see if the upper ridge finally can get “hot enough to intimidate,” and the latest Global Forecast System and latest European models showed a little hotter risks. “Whether this sticks and whether it trends hot enough to impress would need more data come on board, but the latest European model data did tease something finally more impressive around days 13-16 of the forecast,” NatGasWeather said.

With highs in Washington, DC, soaring into the 90s, the heat over the past week may temporarily stall the recent run of triple-digit storage injections. The Energy Information Administration (EIA) on Thursday reported that inventories rose 102 Bcf for the week ending May 29, boosting stocks to some 762 Bcf above year-ago levels. It was the fourth report in five weeks in which the EIA reported a 100 Bcf-plus injection.

Mobius Risk Group said the implied build based on daily storage data from publicly available pipeline bulletin boards points to an injection of less than 100 Bcf in the next EIA report. “If such a result is realized, the storage surplus will see further contraction, and an intensified focus” on daily liquefied natural gas (LNG) feed gas demand “will materialize.”

Indeed, although Lower 48 production remains more than 10 Bcf/d off late-November highs, and industries are starting to recover from coronavirus-related restrictions, sinking LNG demand has prevented futures from breaking out of their recent range. With Covid-19 acting as the straw that broke the camel’s back for the global gas market, U.S. exports have become uneconomic at current prices and may remain so throughout the summer and into the fall.

Energy Aspects pointed out that no U.S. cargoes were delivered to the UK last month, in contrast to four in April and seven in March. This has helped reduce the country’s aggregate gas import take.

The firm now sees reduced imports resulting in aggregate European LNG imports coming in 2.2 million metric tons lower year/year in 3Q2020, marking the first quarterly year/year import drop since 3Q2018. Energy Aspects global gas analyst James Waddell noted that LNG disappearing from Europe’s import balance will act as a price support for all major European Union LNG importing countries relative to the Title Transfer Facility. “We expect this price configuration to hold for contracts delivering throughout 3Q20.”

Although most of the import slowdown is tied to U.S. cargo cancellations, there is also year/year demand growth in import markets beyond Europe. The opening of an inter-basin arbitrage in recent weeks that has caused trade flows to reconfigure towards Asia, including via the reopened Northern Sea Route, Waddell said.

“Some of Asia’s buying is opportunistic and could disappear as LNG storage fills, while other buying will remain supported as long as spot LNG prices stay low, potentially continuing to pull LNG away from Europe.”

Meanwhile, the U.S. economy continues to recover from Covid-19 shutdowns, which slashed heating, power sector and industrial gas consumption by as much as 9.2 Bcf/d in mid-April. The subsequent reopening, however, has narrowed this reduction to 4.0 Bcf/d, according to EBW Analytics Group.

“As state economies reopen, gas demand could soar as seasonal trends are amplified by economic recovery,” the firm said. “At the same time, the loss of demand earlier this spring highlights the potential threat to gas demand, and gas prices, if a second wave forces renewed lockdowns later this year.”

Spot gas prices were lower across the Lower 48 despite continued heat in Texas, the South and the Southeast, as well as on the West Coast. Even the eastern United States was forecast to see a continuation of the warm conditions that moved over the region in recent days.

However, cooler weather was forecast to emerge in the Northwest over the weekend, and all eyes were on Tropical Storm Cristobal, which was expected to be mostly a rainmaker and demand destroyer for the Gulf Coast. LNG operators Cheniere Energy Inc., Freeport LNG and Cameron LNG told NGI that they were monitoring the storm’s path but had not activated any storm preparedness plans on Friday.

In the National Hurricane Center’s (NHC) Friday afternoon update, Cristobal’s forecast track had the storm moving back over the southern Gulf of Mexico late Friday, over the central Gulf of Mexico on Saturday, and near the northern Gulf Coast Sunday evening. Cristobal’s maximum sustained winds were near 40 mph with higher gusts, and some additional strengthening was forecast.

Henry Hub spot gas prices were exactly flat day/day at $1.695, while major hubs in East Texas also barely budged.

In West Texas, Waha cash was down 12.5 cents to $1.440, while NGPL Midcontinent dropped 10.0 cents to $1.545.

Spot gas prices across the Southeast fell up to 10.0 cents on Friday, while several markets in Appalachia posted slightly bigger losses. Tenn Zone 4 200L cash tumbled 12.0 cents to $1.440.

In the Northeast, Tenn Zone 6 200L plunged a more substantial 29.5 cents to $1.445, while prices around New York were only about a dime lower day/day.