Natural gas futures slipped several notches Tuesday as export demand weakened a bit and the latest data showed more seasonal weather ahead. The September Nymex contract settled 4.9 cents lower day/day at $3.896. October slipped 4.4 cents to $3.916.
At A Glance:
- Temperatures seen easing next week
- LNG feed gas slides
- Heat sends cash higher
Spot gas prices, however, continued to strengthen amid widespread heat and humidity across the country. NGI’s Spot Gas National Avg. rose 6.5 cents to $3.995.
Though the summer is winding down, temperatures through the coming weekend are expected to set seasonal records in some regions of the United States. After trending warmer in recent runs, weather models showed gas-weighted degree days coming in only slightly lower than the record levels from two weeks ago.
The Electric Reliability Council of Texas (ERCOT), which manages the power grid for most of the state, expected electricity demand to reach close to 75,000 MW on Tuesday. That would eclipse the current record by less than 100 MW. In May, ERCOT revised lower its expectations for peak power demand to 75,200 MW from 76,696 MW because of coronavirus-related economic repercussions.
Meanwhile, Mobius Risk Group pointed out that, on Monday afternoon, there was a slim 5 GW spread between actual system demand in ERCOT and total available capacity, excluding ancillary services. Grid operators in the Upper Midwest and Northeast also have issued warnings to generators and load sources because of strong late-summer cooling demand.
“In summary, it will be an all-hands-on-deck environment the next couple of days in U.S. power markets,” Mobius analysts said. “As a result, the call on natural gas in the power sector may be decidedly nonlinear over the next 24-48 hours.”
By next week, though, NatGasWeather said weather data showed the pattern shifting closer back to normal. There were also a couple of tropical disturbances that warranted close monitoring. The systems have the potential to strengthen and threaten the Lower 48 with rain and wind in the coming days. Any storm that moves into the Gulf of Mexico also stands to derail demand along the Gulf Coast, including liquefied natural gas (LNG) and power generation.
Meanwhile, LNG volumes on Tuesday softened quite a bit day/day. NGI data showed feed gas deliveries to U.S. terminals sliding to around 10.1 Bcf, off more than 1 Bcf from a week ago.
Power burns remained solid. U.S. dry gas production fell, but revisions were likely.
EBW Analytics Group said the seven-day average of Bloomberg’s gas production estimate has trended 0.8 Bcf/d higher since early August. While supply gains have played a role in recent retests of support, the injection-season trend since the beginning of April has remained flat.
“Flat production growth dispelled notions held by some market participants earlier this year that output would roar higher as prices gained,” EBW analysts said. “Instead, natural gas is facing an end-of-season storage target more than 200 Bcf shy of the five-year average, gas-to-coal switching all but depleted and production plans set through the first half of winter.”
As the market focuses on the extent of upside potential over the next six weeks, renewed upward price pressure is likely, according to EBW. At Tuesday’s close, there was only a 6.6-cent difference between the October and November Nymex contracts. The full winter strip (November 2021-March 2022) was at $4.024.
Climbing Cash
Cash markets across the United States continued to strengthen as sweltering heat blanketed the central and eastern parts of the country. California put up the largest day/day increases, but the Northeast also mounted hefty gains.
The National Weather Service (NWS) said the “sultry” conditions were set to remain in place through at least Thursday. Above-average temperatures are forecast nearly everywhere east of the Rockies, with the lone exception being the Northern Plains. Highs were forecast to reach into the upper 80s and 90s for most locations early this week.
Highs were at risk of reaching the triple digits across parts of Kansas and Oklahoma on Tuesday, but only a handful of daily high temperatures records are at risk of breaking, according to NWS. The large dome of upper level high pressure credited for the hot weather was seen continuing to deflect cold fronts attempting to usher in a more refreshing air mass farther north. This is keeping much of the South and east-central United States hot and muggy. The Southwest also is expected to begin seeing dangerous heat build back into the forecast by Wednesday as the ridge of high pressure stretches into the region, according to NWS.
The projected heat in the West had a pronounced effect on pricing, as it coincided with planned maintenance on the Gas Transmission Northwest (GTN) pipeline system.
GTN on Tuesday began performing an in-line inspection from Kingsgate to Station 4 B-Line, reducing operating capacity at “Flows Past Kingsgate” in Boundary, ID. GTN noted in its maintenance schedule that potential cuts to both firm primary and firm secondary services were high throughout the maintenance event, which is scheduled to end Friday.
Wood Mackenzie said the restriction translated to a maximum cut of 247,639 MMBtu/d.
The heat and pipeline work combined to lift Malin spot gas prices 43.0 cents day/day to average $4.500 for Wednesday’s gas delivery. In Southern California, the SoCal Border Avg. picked up 29.0 cents to reach $4.860.
Opal cash prices were up 15.5 cents on the day to average $3.935. In West Texas, Waha climbed 9.0 cents to $3.695.
In the Northeast, Tennessee Zone 6 200L next-day gas prices climbed 15.5 cents to $4.340, while the majority of Appalachia pricing points softened by a few cents day/day. Transco-Leidy Line fell 4.5 cents to $3.640.
Small gains were seen across the Southeast. In Louisiana, Henry Hub picked up 2.0 cents to average $3.940.
Meanwhile, Wood Mackenzie said it was continuing to monitor nominations on the new TransCameron Pipeline, which would feed Venture Global Inc.’s Calcasieu Pass LNG terminal. Previously, the firm had seen a single Mcf delivery posted to the TransCameron electronic bulletin board (EBB) in late April. Analysts noted at the time that this may have been a result of EBB testing.
While the 1 Mcf data point from April 25 remained (real versus testing status was unknown), the Aug. 20 values noted a 5 MMcf receipt from Bridgeline Pipeline. Bridgeline was sourced in turn from the Sabine Pipeline TransCameron point. Another 5 MMcf was delivered from the ANR Pipeline. At the same time, Wood Mackenzie noted an equivalent 10 MMcf delivery to the Calcasieu Pass LNG facility in Louisiana.
“We are also now seeing posts of operational capacity” at some compressor stations on TransCameron’s EBB – “signs the pipeline is likely to be closer to daily service,” Wood Mackenzie analyst Colette Breshears said.
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August 26, 2021 at 12:10AM
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Natural Gas Futures Prices Slip on Fading Summer Weather; Cash Still Strong - Natural Gas Intelligence
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