Weekly natural gas cash prices gave up ground amid mild temperatures and light demand across much of the Lower 48.
Conditions were comfortable across most of the country for a majority of the trading week, particularly early on, with highs in the 70s as far north as the Dakotas and Minnesota on Monday and Tuesday.
Spot prices tumbled each of the first two trading days of the week, extending losses from the prior week, as widespread highs of 60s to 80s dampened demand.
Losses were also pronounced on the East and West coasts on Tuesday, with prices tumbling 50.0 cents or more at several locations that day. While cash regained some momentum as the week wore on amid sporadic weather systems, weekly prices finished the period in the red.
Hampered by forecasts for benign weather, the November Nymex contract, while volatile, ultimately dipped lower for the week. It settled at $5.280/MMBtu on Friday, down 2.4% from the prior week’s finish.
Forecasters anticipated continued modest demand in the week ahead.
“We remain in a low demand regime, with any variability just able to bring demand closer to normal at times,” Bespoke Weather Services said. “The Pacific side of the pattern currently remains hostile toward any true cold air delivery into the U.S, though it grows less hostile as we reach early November,” suggesting a return to stronger demand next month.
Futures plummeted more than 40.0 cents on Monday, led lower by the forecasts for protracted shoulder season weather.
While futures struggled to fully recoup the steep early loss through the rest of the week, the downward pressure eased alongside expectations for strong demand this winter.
With supplies depleted in Europe and parts of Asia, demand for U.S. exports of liquefied natural gas (LNG) held above 10 Bcf/d during the week and were expected to mount in coming weeks, providing some price support.
At the same time, domestic inventories, while steadily increasing this fall, remain below historic averages, allowing concerns about adequate U.S. supplies to fester.
Rystad Energy analyst Kaushal Ramesh expects Henry Hub prices to be elevated throughout the winter, reflecting “the barely adequate storage levels” that remain below the five-year average due to modest production levels in the wake of the pandemic.
“Continuing capital discipline by drillers has resulted in production lagging consumption and robust exports,” Ramesh said.
However, Thursday’s in-line storage report at least temporarily quelled those worries.
The U.S. Energy Information Administration (EIA) printed a 92 Bcf injection for the week ended Oct. 15. It landed within the range of expectations. Major surveys had coalesced around an injection in the low 90s Bcf. NGI modeled a 95 Bcf build.
The build lifted stocks to 3,461 Bcf. Though stocks remained below the five-year average of 3,612 Bcf, the latest increase was the sixth in a row that came in above the five-year average, according to EIA. The five-year average for the latest reference week was 69 Bcf, while the year-ago injection was 49 Bcf.
At the same time, cold weather has yet to develop in Europe, easing storage fears there as well, EBW Analytics Group said. Inventories were about 74% of capacity at mid-October, but forecasts point to a mostly warm weather pattern into November, providing a path to plumper inventory levels over the next few weeks.
Futures fell Thursday against the storage backdrop. But they rebounded Friday with colder weather in forecasts for November and gained 16.5 cents to finish the week’s final trading session.
Spot natural gas prices on Friday varied by region. NGI’s Spot Gas National Avg. ticked up 2.5 cents to $4.940 for weekend through Monday delivery.
In the Midwest and across large swaths of the East, where cool weather either settled in on Friday or was expected to by the weekend, prices advanced.
NatGasWeather said demand Friday was supported by chilly air and scattered showers across the Midwest and Great Lakes regions. That system was expected to track across the Northeast over the weekend with lows of 30s and 40s.
The West, meanwhile, enjoyed comfortable highs in the 60s to 80s Friday. However, the region’s weather “will be active through” the coming week “as a barrage of weather systems bring heavy rain and mountain snows with highs of 40-60s,” NatGasWeather said.
The storms “will track across the northern third of the United States with highs of 40s-60s over the course of the week, the firm added. However, most of the southern two-thirds of the country is expected to enjoy mild weather that is unlikely to galvanize either heating or cooling demand.
“National demand will fall to very light levels” as a result, NatGasWeather said.
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