Natural gas futures broke even Thursday as markets looked past improved U.S. liquefied natural gas (LNG) export demand and a light storage report to the expected onset of fall weather, eased cooling demand and the likelihood of more robust stockpile injections in coming weeks.

EIA storage Sept. 3

The October Nymex contract inched up one-tenth of a cent day/day and settled at $2.487/MMBtu. November dipped four-tenths of a cent to $2.927.

Cash prices climbed higher, however, as near-term cooling demand mounted along with a late-summer burst of heat in the West. NGI’s Spot Gas National Avg. rose 12.0 cents to $2.260.

The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 35 Bcf into storage for the week ending Aug. 28, a figure that was in line with median estimates of major polls. Prior to the report, a Bloomberg survey found a median of 37 Bcf, while a Reuters poll landed at 35 Bcf. NGI estimated an injection of 32 Bcf.

The latest injection was below the 77 Bcf injection reported a year earlier. It also was notably lower than the five-year average build for the week of 66 Bcf. EIA last Thursday reported a 45 Bcf injection for the week ended Aug. 21.

“It was very warm to hot over most of the United States” during the reporting period, NatGasWeather said.

Futures climbed shortly after the EIA report but quickly lost momentum.

The build for the Aug. 28 week boosted inventories to 3,455 Bcf, well above the year-earlier level of 2,917 Bcf and above the five-year average of 3,048 Bcf. Looking ahead to next week, early estimates hovered around a build of 60 Bcf or higher. Analysts said underground stocks could swell further in ensuing weeks, raising containment concerns ahead of winter.

“We still see balances as loose enough to be quite dicey at the front of this curve,” said Bespoke Weather Services. Its preliminary model is a build of 62 Bcf for the next EIA report.

After this week’s heat, “we continue to see a rather tame demand pattern over the next 15 days as a whole” as cooler weather is projected to settle in across much of the nation’s midsection, Bespoke said. Weather models “still advertise that better heat, relative to normal, can return to the eastern half of the nation later in the month. However, “with normal temperatures in a rapid state of decline at that point, it becomes tougher to move the needle.”

NatGasWeather made a similar assessment. “The next several builds will be much larger, with early market estimates we’ve seen for next week ranging between 60-75 Bcf and 80-95 Bcf for the build after,” the forecaster said.

To better align supply and demand and support gas prices, the forecaster in a midday report Thursday said the market is looking to continued improvement in LNG feed gas demand to offset anticipated declines in gas-powered air conditioner use.

“We expect LNG feed gas will be the big story ahead of and during the long Labor Day weekend break, specifically whether Sabine Pass LNG feed gas resumes.” NatGasWeather said. 

LNG feed gas climbed higher Thursday, to 3.25 Bcf from 3.15 Bcf a day earlier, NatGasWeather noted, indicating export demand is beginning to mount ahead of the cold winter months.

Following the destruction of Hurricane Laura last week that cut off power to nearby refineries and industrial plants, however, the Sabine Pass and Cameron LNG export facilities in Louisiana had yet to resume significant operations as of Thursday. Other sites were picking up the slack this week, NatGasWeather said, but it is important for the key facilities to come back online.

Based on midday data from offshore operators Thursday, the Bureau of Safety and Environmental Enforcement (BSEE) said 51 production platforms in the Gulf of Mexico remained unmanned, nearly 8% of the total. Additionally, one of 12 rigs remained unmanned.

BSEE estimated that 15.50% of natural gas production in the GOM was still shut-in, while 16.27% of oil remained offline in Laura’s wake.

Cash Cruises

Spot gas prices continued an upward march Thursday, with heat intensifying in the West.

While cooler over much of the central United States, national demand is solid this week “as high pressure builds into the East with highs of upper 80s and lower 90s gaining in coverage,” NatGasWeather said. “It’s also hot over the West with 90s and 100s, while very warm to hot from Texas to the Southeast with upper 80s to lower 90s.”

Most notably, already lofty temperatures in the West led the California Independent System Operator to warn of potential power outages heading into the Labor Day weekend. The National Weather Service was forecasting temperatures in excess of 100 degrees across large swaths of California and the Southwest through the weekend.

SoCal Citygate soared $1.855 day/day to an average of $5.005, while SoCal Border Avg. spiked 99.5 cents to $3.545.

Kern Delivery jumped $1.645 to $4.565, and El Paso S. Mainline/N. Baja climbed $1.285 to $4.265.

In Texas, El Paso Permian prices advanced 19.5 cents to $2.125, and Waha rose 19.0 cents to $2.100.

Elsewhere, prices were mixed, with mostly modest changes. Prices declined across Appalachia and the Northeast but gained ground in the Rocky Mountains and Midcontinent.