A pipeline notice raising the prospect of prolonged supply disruptions out of the Northeast had natural gas futures surging in early trading Friday. The July Nymex contract was trading 10.3 cents higher to $3.252/MMBtu at around 8:50 a.m. ET.

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In a posting to its bulletin board shortly before 6 p.m. ET Thursday, Texas Eastern Transmission Co. (Tetco) said a pressure reduction started this month on part of its 30-inch diameter system — required by a Pipeline and Hazardous Material Safety Administration (PHMSA) order — could last until late in the third quarter.

Analysts at EBW Analytics Group described the Tetco notice as “big news,” noting that the operator revealed “that the reduction in pressure in its 30-inch pipeline was triggered by an anomaly that had been identified during an in-pipe inspection. While the full scope of the anomaly has not been determined, Tetco stated that full service is likely to resume in late 3Q2021 at the earliest.”

The news triggered an after-hours surge in natural gas futures prices.

“While some of the affected gas is likely to be re-routed, flows from Appalachia to the South could be reduced for months,” the EBW analysts said. “It is also possible that sections of the pipeline will need to be shut down while the anomaly is being corrected, further magnifying the impact on gas prices.”

As for the updated weather outlook, NatGasWeather observed “no major changes” based on overnight model runs.

“After an initial cool shot exits the East late next week, a second is forecast to follow June 21-23 for near normal national demand,” the firm said. “However, the overnight data continued to favor high pressure over the West shifting over the more important South and Southeast June 24-27 for an increase in national demand and where the pattern would likely again be hot enough to satisfy.”

Meanwhile, analysts at Tudor, Pickering, Holt & Co. (TPH) said the most recent week of power generation data could be “the story worth watching” in the natural gas market. The numbers are “giving an early indication that coal may struggle” to step back into the power stack when called upon due to higher natural gas prices.

“Power generation is up nearly 7 Bcf/d week/week to levels normally reserved for late June or early July, but, more importantly, gas’ share of thermal generation has averaged 61% this week versus our modeled 57% at current gas prices,” the TPH analysts said. 

The TPH team cautioned that these numbers represent a small sample of data. Still, “the weak coal generation numbers equate to an incremental 3.5 Bcf/d of power burn, and if this trend continues into summer it would bring material upside for Henry Hub into $3.50-plus territory.”

July crude oil futures were up 11 cents to $70.40/bbl at around 8:50 a.m. ET, while July RBOB gasoline was off about 3.3 cents to $2.1790/gal.