Spot natural gas prices headed lower during the June 30-July 1 trading period for July natural gas delivery amid cooler temperatures in Texas, fleeting bouts of heat elsewhere and the typical lull in demand seen over a holiday weekend. NGI’s Weekly Spot Gas National Avg. dropped 49.5 cents to $5.845/MMBtu.

Futures action in the natural gas arena, meanwhile, was fueled with volatility that drove gas prices sharply lower through the week. When the dust settled at the close of Friday’s session, August Nymex contract was well under the $6.00 mark at $5.730.

There was no shortage of fireworks in the gas market ahead of the Independence Day holiday weekend, but the mostly soggy forecast likely squashes plans to light up the night sky with red, white and blue.

The National Weather Service (NWS) said a slow-moving cold front would spread showers and thunderstorms from the Central Plains to the Midwest. Pockets of heavy rainfall may develop over sections of the Lower Missouri Valley, while troughing and an area of low pressure along the Gulf Coast would produce heavy rainfall along parts of the upper Texas Coast. Excessive rainfall also was possible in the Southeast, while showers and thunderstorms were expected to move into the Ohio Valley and Northeast/Mid-Atlantic over the weekend.

Meanwhile, another wave of low pressure was forecast to emerge from the Rockies, resulting in scattered showers across the Great Plains, NWS forecasters said. Some thunderstorms, particularly over the Front Range into South Dakota/Nebraska, have the potential to become severe with large hail and wind damage possible.

Prices fell hardest on the West Coast for the two day trading week for July natural gas delivery. In Northern California, PG&E Citygate plunged $1.125 week/week to average $6.730. The SoCal Citygate was down $1.285 to $5.895.

Rockies locations followed up with losses of up to 74.0 cents on the week at Transwestern San Juan, which averaged $5.610.

Upstream in the West Texas portion of the Permian Basin, Waha slipped only 39.5 cents to $5.555. That was in line with other price decreases seen across the state.

Similar losses spread across the country’s midsection, with $5 handles seen at the majority of locations. Emerson slipped to $4.625 after shedding 72.5 cents week/week.

East Coast market declines trailed the rest of the country ahead of hotter weather in the early part of the weekend, but severe storms were set to quickly send temperatures lower. Algonquin Citygate cash averaged only 14.0 cents lower on the week at $5.840, while Transco Zone 6 non-NY averaged 27.0 cents lower at $5.475.

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

Are Balances Really Loosening?

Natural gas cash prices weren’t the only ones that got doused this week. Futures suffered quite the beating as June drew to a close. While the first trading day in July brought about a substantial recovery, the damage to pricing was too great to overcome after the latest government inventory report and a regulatory update regarding Freeport.

On the supply side, the Energy Information Administration (EIA)’s weekly storage report confirmed loosening in the market since Freeport shut down after an explosion in early June. The EIA said stocks for the week ending June 24 rose by 82 Bcf, which was a much larger increase than the market had expected. The prior EIA report also surprised to the high side.

“This selloff over the last couple of weeks has revealed how vulnerable the U.S. is to disruptions to LNG export facilities,” Aegis Hedging Solutions LLC analyst Nick Hillman told NGI. “The Freeport LNG outage basically loosened the U.S. market’s supply/demand balance by 2 Bcf/d overnight.”

Mobius Risk Group noted that weather during the period covered in the latest EIA report was not materially different week/week. As such, some have speculated that production was higher than expected, leading to the heftier increase in storage. While this cannot be ruled out, Mobius said it would be wise to wait another week or two before assuming balances are decidedly loosening.

“Additionally, it is also wise to consider the fact that salt storage continues to fall,” the analytics firm said.

The EIA said salt stocks fell by 6 Bcf for the week ending June 24, while nonsalts added 16 Bcf to storage. This resulted in a net build of 11 Bcf for South Central inventories.

Mobius noted that the continued draw from salts is occurring despite the fact that the LNG outage at Freeport is very near most of the country’s salt storage. At the same time, any unseen production growth in Texas also would be very near most of the country’s salt storage. “In summary, the overall build and the change in salt storage (-6 Bcf) are offering conflicting data points.”

Freeport Outage Uncertainty

The latest EIA data alone sent futures prices tumbling, but the sell-off Thursday intensified when word spread that federal regulators would become more heavily involved in the eventual return of the Freeport terminal. The Pipeline and Hazardous Materials Safety Administration’s proposed safety order is routine procedure, but it may complicate Freeport’s plans for restart at a time when global natural gas supplies are stretched thin.

Freeport LNG Development LP said Thursday after the notice was issued that it expects to resume partial liquefaction operations by early October. It had originally planned for partial service in early September.

Still, EBW Analytics Group said that timeline is optimistic. Its reading of PHMSA’s updated assessment suggests that a more realistic target for partial operations may be closer to six months. Full operations may not restart until well into 2023.

The extended outage projections provide a modest boost to the October storage target to almost 3.54 Tcf, according to EBW. The bulk of modeled demand losses, however, loosen storage balances for the winter and lessen shortage risks that threaten to send Nymex futures skyward. EBW sees inventories at the end of March at 1,250 Bcf.

“Although the bearish EIA storage surprise ignited Thursday’s selling pressures, the risk of extended 2.0 Bcf/d outages at Freeport LNG represent the primary bearish fundamental catalyst driving Nymex futures lower,” EBW senior analyst Eli Rubin said.

Fizzling Cash

Spot gas prices softened ahead of the holiday weekend, even with some pipeline maintenance restricting gas flows.

Great Lakes Gas Transmission (GLGT) issued a force majeure on Thursday because of equipment failure at Unit 201 at the Thief River Falls Compressor Station 2. As a result, effective through July 10, operational capacity at Emerson Eastbound in Kittson County, MN, has been reduced by 392 MMcf/d. This leaves an operational capacity of 1,630 MMcf/d.

However, according to the timely cycle for Friday, Wood Mackenzie said operational capacity was reduced to 1,568 MMcf/d. In the last 30 days, flows through Emerson Eastbound averaged 1,624 MMcf/d and maxed at 1,800 MMcf/d. GLGT expects this force majeure to have a 6% impact on firm primary service.

Looking ahead, Creole Trail Pipeline is scheduled to perform work at its Gillis Compressor Station from July 6-12. The maintenance would likely cut around 342,319 MMBtu/d of deliveries to Sabine Pass Liquefaction based on the past seven-day average. Wood Mackenzie noted that in the past 30 days, Creole Trail-SPLIQ averaged 1.35 Bcf/d and maxed at 1.54 Bcf/d on June 20.

Despite the pipeline work, gas prices cratered across the Lower 48 on Friday for weekend through Tuesday delivery.

Northeast prices came off the most, with New England locations shedding more than $1.00 on the day. PNGTS dropped $1.665 to $5.970 for the four-day gas delivery. Transco Zone 6 NY was down 79.5 cents to $5.155.

Appalachia markets posted hefty declines as well, with hot weather on the East Coast giving way to soggier conditions over the weekend. Eastern Gas South was down 54.5 cents to $5.010.

Southeast locations fell by more than 70.0 cents at a couple of points, which was in line with decreases seen at Henry Hub. The benchmark dropped 73.0 cents to $5.730 for gas delivery through Tuesday.

Huge losses extended across Texas, where Houston Ship Channel came off 97.0 cents to average $5.360.

In California, the SoCal Border Avg. plunged $1.065 to $5.315.