In an abbreviated week of spot trading influenced by colder weather and yet another hurricane in the Gulf of Mexico (GOM), weekly cash prices surged.
NGI’s Weekly Spot Gas National Avg. for the Oct. 26-29 period jumped 59.5 cents to $3.000. This week’s average only includes trades conducted through Thursday, the cutoff for gas delivery through the end of October.
Chilly air settled in across the country’s midsection, freezing the Upper Midwest and delivering below-average temperatures as far south as Texas. The cold blast boosted heating demand across large swaths of the Lower 48 and propped up spot gas prices.
On the supply front, offshore production was shut-in as Category 2 Hurricane Zeta arrived in the GOM Wednesday. Zeta made landfall in southeastern Louisiana packing maximum sustained winds of 110 mph, before moving across the southeastern and eastern United States on Thursday.
Ahead of its arrival, 45% of the natural gas produced in the GOM had been shut-in, according to the Bureau of Safety and Environmental Enforcement. The threat to supply provided additional cash price support.
Remnants of Zeta merged with a weather system over the east-central United States Thursday to produce heavy rains. NatGasWeather said new blasts of cold could support demand early in the first week of November.
“A stronger cold shot will sweep across the Northeast” Monday and Tuesday, “bringing chilly lows of 10s to 30s and why national demand will remain strong enough” to start the week, the forecaster said.
After that, however, comfortable fall conditions are expected to spread across much of the central and eastern United States, diminishing weather-driven demand.
Stronger economic activity – and increased energy use along with it – could fill the void. But economists say new coronavirus outbreaks are threatening to curtail activity in November and beyond.
“Testing and tracing is an effective tool in preventing the spread of the virus, and the U.S. is still way behind,” Raymond James Chief Economic Scott Brown said. “We can’t even get people to properly wear masks, which is by far the most effective means of containing the virus. As a consequence, the pandemic is expected to last a lot longer.”
Futures Finish Strong
The November Nymex contract expired 2.3 cents lower at $2.996 on Wednesday and, a day before it moved to the front of the curve, December fell 2.0 cents to $3.291. Uncertainty about the midrange weather outlook curbed enthusiasm.
Natural gas futures, however, regained ground and finished trading a penny ahead Thursday after a bullish storage report.
The Energy Information Administration said that U.S. stocks rose by 29 Bcf for the week ending Oct. 23. Markets had anticipated a larger build of as much as 46 Bcf. NGI had projected a 42 Bcf injection.
Bespoke Weather Services said the 29 Bcf number suggested that recently higher prices were not yet curbing demand. Prices could climb higher in coming weeks if Mother Nature cooperates with further blasts of unseasonably cold air later in November.
For the week covered by EIA’s latest storage report, strong liquified natural gas (LNG) levels, with feed gas deliveries above 8 Bcf, helped drive demand and keep injections low.
Total working gas in storage for the week rose to 3,955 Bcf. That was 285 Bcf above year-earlier levels and 289 Bcf above the five-year average, according to EIA. A week earlier, the surpluses to the year-ago and five-year average were well above 300 Bcf.
Analysts said that, in addition to weather, rising demand for U.S. LNG exports to fuel heating needs in Asia and Europe could help soak up supply and support prices moving into winter. LNG feed gas volumes inched up further early Friday after topping 9.5 Bcf/d a day earlier, led by rising output at Sabine Pass — 4.1 Bcf/d — according to EBW Analytics Group.
Lifted by the LNG momentum, futures finished the week on a high note. The December Nymex contract gained 5.3 cents day/day and settled at $3.354/MMBtu. January advanced 5.2 cents to $3.469.
Friday Cash Prices
Spot gas prices sputtered in Friday trading for Sunday and Monday delivery along with the forecasts for comfortable temperatures.
After a short-term freeze to start November in parts of the Midwest and East, temperatures were forecast to warm into the 50s to 80s across much of the country, NatGasWeather said. “The Northeast will warm into the 50s and 60s” as the first week of November progresses, limiting heating needs in an important demand region.
Prices in the Northeast, where several hubs posted steep drops, drove down the national average. Tenn Zone 6 200L North prices dropped $2.560 day/day to an average $4.700, while PNGTS lost $2.980 to $4.290.
On the pipeline front, Genscape noted that Millennium declared a force majeure on Thursday after an unplanned outage at its Hancock compressor station in Delaware County in NY. As a result, the firm said, capacity through the Wagoner West throughput meter in Orange County, NY, was expected to be reduced to 1144 MMcf/d starting Saturday.
That would represent a 73 MMcf/d cut in capacity compared to its standard.
“Flows through Wagoner West have averaged 983 MMcf/d over the last 14 days but have ramped up recently in light of incoming cold weather,” Genscape said. “This constraint may cause slight bullish pressure” on Algonquin Citygate prices. As of Friday, there was no estimated date for a return to service.
Algonquin Citygate prices on Friday for Sunday and Monday delivery, however, dropped $2.925 to $3.610.
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