In a week that started slowly as traders mulled modest shifts in weather forecasts, weekly natural gas cash prices ultimately finished in the red, dragged down by a midweek drop that coincided with the arrival of unseasonably warm air in the Upper Midwest.

EIA storage Nov 13

Cash prices sank 37.5 cents on Wednesday, more than erasing a modest gain earlier in the week, as rising production overlapped with mild central U.S. temperatures that eventually pushed east and sapped national heating demand.

Comfortable conditions hung around the rest of the week – amplified by forecasts for warmth deep into November and beyond – pushing spot prices down a bit more Thursday before they recovered some ground on Friday.

NGI’s Weekly Spot Gas National Avg. for the Nov. 16-20 period finished down 18.0 cents to $2.330.

[NGI’s natural gas price indexes have included trade data from both price reporters and the Intercontinental Exchange (ICE) since 2008. Find out more about our price index data here.]

Chicago Citygate was down 34.0 cents to $2.220 as the trading week ended. OGT was off 48.5 cents to $2.035, while Cheyenne Hub was down 41.5 cents to $2.105.

Bespoke Weather Services said that while mid-range weather patterns displayed some variability, the final full week of November and the first several days of December were laced with expectations for above-normal temperatures and below-average heating demand.

The pattern is “quite hostile toward any cold as we enter December, meaning it is highly likely that at least the first third of December comes in warm to very warm,” Bespoke said.

At the same time, the forecaster added, production has climbed in November, eclipsing 90 Bcf during the covered week. That had not happened since April. 

“These factors have led to loosening from the super tight supply/demand balances we had seen for a few weeks,” Bespoke said.

Analysts said momentum for cash prices may prove elusive for the next couple weeks as the comfortable fall conditions linger. Prices “will remain under pressure through Thanksgiving” and may leave traders with “little reason to step back into the market,” EBW Analytics Group.

Rough Ride

Natural gas futures gave up ground over the course of the week as well, encumbered by the benign weather, rising production and a second-consecutive week of storage injections.

The December Nymex contract dropped 12.0 cents day/day on Thursday after the Energy Information Administration (EIA) reported a 31 Bcf storage increase for the week ended Nov. 13. The addition to stockpiles reflected above average temperatures over the eastern two thirds of the country during the covered period.

Gas-weighted heating degree days were more than 50 below the five-year average during the week. Analysts at Tudor, Pickering, Holt & Co. (TPH) estimated a loss of around 8 Bcf/d in residential/commercial demand due to the below-normal conditions.

The latest injection figure was notably above the median of analysts’ estimates in several polls, the highest of which was a Bloomberg survey that produced a median estimate of a 22 Bcf increase.

NGI modeled a 23 Bcf injection. A year earlier, EIA recorded a 66 Bcf withdrawal for the period.

It marked the second-consecutive result that was bearish relative to expectations, following a bullish finish to October. EIA reported an injection of 8 Bcf into storage for the week ending Nov. 6. A week earlier, the agency reported a withdrawal of 36 Bcf that marked the first pull of the season and the first decrease in stocks in October in more than 10 years.

The build for the Nov. 13 week lifted inventories to 3,958 Bcf, above the year-earlier level of 3,665 Bcf and above the five-year average of 3,727 Bcf.  

On the positive side, analysts noted that U.S. liquefied natural gas (LNG) volumes hovered near or above 10 Bcf all week, reflecting strong export demand ahead of winter. LNG levels have been consistently strong throughout November. But the rebound in production effectively offset the export momentum, leaving traders to fixate on a weather pattern that provided little reason for demand optimism.

“As we try to look past a horrific week for gas pricing, producers aren’t doing themselves any favors as pipe flows show production up 2.1 Bcf/d week/week to 90.9 Bcf/d, the highest weekly level since April,” the TPH analysts said.

The December Nymex contract closed the week at $2.650/MMBtu, up 5.8 cents day/day as traders seized a buying opportunity, but the prompt month was down nearly 8% from where it opened the trading week.

Friday Cash

Spot gas prices advanced overall Friday for weekend and Monday delivery after declining over the three previous days, though western regions gave up some ground.

That noted, comfortable weather that generated little heating demand most of the week is expected to extend well into next month, NatGasWeather said.

A “quick cold shot with rain and snow” was expected to “sweep across the Midwest” ahead of the Thanksgiving holiday, with highs in the 30s and 40s for a modest bump in national demand, the forecaster said. But from Thanksgiving into early December, the northern United States will see overall warmer-than-normal conditions, with highs ranging from the 30s to 50s, while southern states will enjoy highs of 60s to 80s.

Price gains Friday were the strongest in the East and Midwest.

Tenn Zone 5 200L advanced 57.0 cents day/day to an average $2.110, while Dominion South gained 25.5 cents to $1.470, and Dawn rose 11.0 cents to $2.130.

Elsewhere, however, prices were either up modestly or down on the day.

In the Rocky Mountains, Opal shed 17.0 cents to $2.870, while Kingsgate lost 21.5 cents to $2.885.

Price declines were the steepest in California, where SoCal Citygate gave up 38.0 cents to $3.430.