As overnight weather data shifted warmer, and as traders mulled the implications of an export ban out of Texas, natural gas futures pulled back a few cents in early trading Thursday. The March Nymex contract was down 4.3 cents to $3.176/MMBtu at around 8:50 a.m. ET.
The major weather models trended warmer overnight, lowering demand projections for late February through the first two days of March, according to NatGasWeather.
“Overall, the overnight data maintained strong demand through Sunday, then easing to moderate levels next week as the frigid Arctic cold pool retreats into northern Canada,” NatGasWeather said. “A warm ridge will span from Texas to New York City next week through March 2, with comfortable highs of 50s to 70s” resulting in weaker national demand for this time frame.
“However, much of the data teases cold air over Canada pushing more aggressively across the border March 3-5 for a return to strong national demand. Although, we caution the weather data has been inconsistent with the early March pattern, and there are ways it plays out colder than currently forecast.”
NatGasWeather said it expects another volatile day of trading in the natural gas market Thursday amid ongoing chaotic conditions in Texas caused by Arctic temperatures sweeping through the state.
“It’s difficult to know if the natural gas markets are looking to early March patterns or are focused on the current/recent Arctic blast,” the firm said.
Texas Gov. Greg Abbott on Wednesday issued an order prohibiting producers from transporting natural gas beyond state lines, effective through Sunday.
Analysts at Wood Mackenzie said the order, which comes as many Texans remain without power and as prices in the Electric Reliability Council of Texas (ERCOT) territory have been “through the roof,” reflects an effort to redirect more natural gas to power generation in the state.
“Whether or not the governor has the authority to allow producers to not fulfill existing contracts is still unclear,” the Wood Mackenzie analysts said. “This order could have serious implications for the Texas natural gas markets, as well as surrounding markets.”
Exports to Mexico and via liquefied natural gas in particular could be impacted by the temporary ban of gas sales outside the state, according to Wood Mackenzie.
ERCOT said Thursday morning that it has made “significant progress” overnight restoring customer power, although some outages still remain throughout the state.
Energy emergency conditions remain as the grid operator and transmission owners work to restore the remaining customers that are without power, according to ERCOT.
“We’re to the point in the load restoration where we are allowing transmission owners to bring back any load they can related to this load shed event,” said ERCOT Senior Director of System Operations Dan Woodfin. “We will keep working around the clock until every single customer has their power back on.”
While there is no additional load shed occurring at this time, a little over 40,000 MW of generation remains on forced outage due to this winter weather event. Of that, 23,500 MW is thermal generation and the rest is wind and solar. It is possible that some level of rotating outages may be needed over the next couple of days to keep the grid stable.
Meanwhile, the Energy Information Administration (EIA) on Thursday is projected to reveal a withdrawal potentially greater than 250 Bcf for the week ending Feb. 12, which would be the largest pull of the season so far. Reuters polled 18 analysts, whose estimates ranged from withdrawals of 288 Bcf to 202 Bcf, with a median decrease of 250 Bcf. Wall Street Journal estimates were in the same range, with a median of 251 Bcf decline. NGI projected a 286 Bcf pull.
Last year, the EIA recorded a 141 Bcf during the same week, while the five-year average withdrawal for the period stood at 142 Bcf.
March crude oil futures were up 40 cents to $61.54/bbl at around 8:50 a.m. ET, while March RBOB gasoline was trading about 1.2 cents higher to $1.8228/gal.
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