Weekly natural gas cash market prices escalated three out of five trading days across much of the Lower 48, led higher by cooling demand in the West and production declines in the East and in Texas in the wake of a tropical storm in the Gulf of Mexico (GOM).
However, a sharp pull-back late in the week, following production returns in the GOM and the potential for fading weather demand, curbed the momentum, and weekly prices finished in the red.
NGI’s Weekly Spot Gas National Avg. for the Sept. 21-25 period declined 9.5 cents to $1.640.
Tropical Storm Beta on Tuesday pushed into the Gulf Coast, bringing strong winds, heavy rains and flooding before weakening to a tropical depression. The storm forced pullbacks on gas production. Maintenance work and curtailments in the East compounded the declines. But production started to recover in the GOM before the week ended, signaling an easing of near-term supply interruptions in the region, and weather forecasts shifted cooler across the East to offset lower production there.
The near outlook for weather-driven demand is mixed.
Lofty temperatures in the 90s and 100s in California and into the Southwest are expected to continue in the week ahead, supporting demand, though this could be offset by below-normal temperatures in regions across the eastern half of the Lower 48.
“The forecast trends additionally hotter in the West, where places like Phoenix and Sacramento challenge daily records,” Maxar’s Weather Desk said. But, in addition to cooling in the East, “a trough is expected to deepen over the Midcontinent, promoting a round of belows for the Midwest and South.”
After a slow start to the week – a 21.3-cent drop Monday and a flat finish the following day — October natural gas futures surged nearly 30 cents Wednesday in an anticipation of a recovery in liquefied natural gas (LNG) volumes and a light storage build. When both became reality on Thursday, the prompt month jumped another 12 cents and paved the wave for strong week overall.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 66 Bcf into storage for the week ending Sept. 18. The result was below the low end of estimates found by major polls and compared favorably to the 97 Bcf injection reported a year earlier and the five-year average build of 80 Bcf.
The latest EIA report, coupled with encouraging signs on the LNG front, was bullish enough to allay the containment concerns that weighed on markets following the prior week’s robust build of 89 Bcf.
“This number reflects very tight balances — the tightest we have seen in our data all summer long,” Bespoke Weather Services said.
LNG volumes were dragged lower early in the week when Beta interrupted feed gas flows to Gulf Coast terminals – the latest fallout from an intense storm season in the Atlantic. After approaching 8.0 Bcf the previous week, LNG volumes fell below 4.0 Bcf Tuesday. But as Beta’s impact subsided, LNG levels climbed back above 4.0 Bcf Wednesday and approached 6.0 Bcf Thursday.
LNG feed gas ticked up again Friday – topping 6.0 Bcf – but traders took profits and the prompt month shed 10.9 cents to close the week at $2.139/MMBtu. The October contract rolls off the board Monday.
What’s more, a sustained LNG recovery is not yet assured, and containment remains a threat. The latest build lifted inventories to 3,680 Bcf, and with seven weeks left in the traditional storage season, an average weekly injection of 45.71 Bcf would put stockpiles on track to hit 4.0 Tcf. If the industry exceeded that level, it could run out of storage.
“It all hinges on containment or not,” Bespoke said, “and we continue to walk a very fine line there.”
Spot gas prices tumbled Friday for weekend and Monday delivery amid evolving supply and demand dynamics that have injected volatility into several regions.
Comfortable highs of 70s and 80s spanned much of the country Friday, minimizing near-term weather demand.
Prices dropped in every region, though the declines were most pronounced in the East and in West Texas.
Domestic natural gas production plunged more than 3 Bcf at one point in the week leading up to Friday’s trading, in part because of Gulf Coast production temporarily pushed offline by Beta, following previous storms. The decline was more pronounced because of the planned fall maintenance and near-term curtailments in the East amid uneven demand and storage challenges, according to RBN Energy LLC analyst Sheetal Nasta.
“Storage levels are soaring, not just in the Northeast but also in downstream markets, reducing flexibility to navigate supply congestion and forcing production curtailments,” Nasta said.
The result: price volatility.
Ahead of Friday, cash prices in the East and overall strengthened as production pulled back, Nasta noted, but the advances appeared overdone, and cash clunked to close the week.
In California, meanwhile, prices continued to prove volatile as they have for most of September. Late summer heat continues to drive cooling demand in the West, but scorching wildfires in the Golden State have interrupted commerce, forced evacuations and caused power outages.
On Friday, Pacific Gas & Electric Co. (PG&E) cautioned that, over the weekend, 21,000 Northern California customers could see power shutoffs because new fire conditions were ripening. “Hot and dry conditions combined with expected high wind gusts pose an increased risk for damage to the electric system that has the potential to ignite fires,” PG&E said.
As was the case over several previous days, prices climbed at certain California hubs and fell at others as fire dangers shifted. Malin lost 21.5 cents to $2.240, while SoCal Citygate jumped up 20.0 cents to $3.040.
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