Volatility abounded Tuesday as natural gas futures quickly gave back the gains they accumulated at the top of the week. Pressured by weaker power burns, the September Nymex gas futures contract settled at $3.837, off 10.9 cents from Monday’s close. October tumbled 10.9 cents to $3.851.
At A Glance:
- LNG volumes hold near 11 Bcf
- Grace heading to Mexico
- Coal stealing market share
Spot gas prices also continued to fall amid mostly comfortable temperatures in the eastern half of the country. NGI’s Spot Gas National Avg. slid 13.5 cents to $3.815.
With long-range weather outlooks not deviating much from prior forecasts, futures traders focused on the impact that current mild weather was having on power burns and cash prices. Bespoke Weather Services said power burns were the weakest they had seen in a while, which is “somewhat of a surprise.” The firm said the decline, something it intends to monitor going forward, indicated that there is more coal in the power generation stack that could take some share away from gas.
Production figures continued to fluctuate but generally remained firmly entrenched in the low 90s Bcf/d range. Liquefied natural gas volumes also were stable near 11 Bcf.
On the weather front, the latest models cooled a bit but remained in a pattern biased to the warmer side of normal, according to Bespoke. By the end of the month, though, a near-normal outlook is seen for the Lower 48.
The forecaster noted that September may be tough to run hotter than normal considering how many hot Septembers have materialized in recent years. It sees the best chance of heat versus normal over the next 10 days mostly in the eastern half of the nation. The warmth would then relocate to the western states in the 11- to 15-day period.
Meanwhile, as Tropical Depression Fred moved inland across the Southeast, all eyes were on Tropical Storm Grace. The storm, packing winds near 50 mph as of 2 p.m. ET Tuesday, is forecast to move near or over the Cayman Islands late Tuesday and early Wednesday. Grace then is expected to approach the Yucatan Peninsula of Mexico late Wednesday or early Thursday.
Mobius Risk Group said weather model volatility always carries the potential to enhance day-to-day price volatility. “With the front of the curve still hovering near $4.00, the ever-present fall demand lull makes this dynamic all the more material.”
Despite Tuesday’s slide, storage concerns were still reflected in the Nymex curve. The March/April spread, dubbed the widowmaker, was a stout 51.1 cents. For reference, the March/April spread peaked at 66.2 cents in late July, “but has remained representative of a concern that late winter inventory will be dangerously low,” according to Mobius.
With more than two months remaining in the traditional injection season, estimates point to below-normal inventories at the end of October at around 3.5 Tcf or lower. As of Aug. 6, working gas in storage was 2,776 Bcf, which is 548 Bcf below year-ago levels and 178 Bcf below the five-year average, according to the Energy Information Administration (EIA).
Until the Labor Day holiday is digested, Mobius analysts said the market would likely be pushed around by weekly storage inventory numbers and daily weather forecasts. As of early Tuesday, the 15-day weather forecast called for 166 cooling degree days, which is 20 more than the 30-year normal and 13 above the 10-year normal.
“Any cooler revisions will likely prevent the September contract from expiring above the $4.00 mark,” the Mobius team said. …”Conversely, if the later half of August remains squarely in the top 10 warmest for this time period, the $4.00 level could once again become a support level rather than a resistance level.”
Bespoke said while this week’s EIA storage figure would no doubt reflect looser balances than the last several numbers, models still pointed to near 3.5 Tcf for an end-of-season storage level. This is “hardly one that should inspire a great deal of comfort,” according to the firm.
Moving prices lower, especially several cents under cash, would only tighten balances even more, Bespoke said. “As such, we do not see a logical reason to continue lower. The overall picture is still bullish enough to suggest that would not make much sense. That said, we know the market loves to overshoot, and if we do break under this support level, it could invite more selling first.”
More Cash Losses
With mild weather in the East and expected rains keeping Gulf Coast temperatures in check, spot gas prices continued to decline Tuesday.
NatGasWeather said “comfortable” daytime highs in the 70s and 80s were forecast across the Great Lakes and East for the next few days as the remnants of Fred streamed northward. Though it remained hot over the Plains, parts of Texas were in store for storms for the next couple of days.
As such, spot gas prices for gas delivered on Wednesday fell across most of the state. Katy next-day gas slipped 5.5 cents to $3.855. Losses in South Texas were a bit stronger, while in West Texas, prices rebounded from the prior day’s slide. Waha jumped 13.0 cents to $3.710, part of a broader move higher for Permian Basin points following the restrictions put in place on the El Paso Natural Gas Pipeline system after Sunday’s fire.
Prices throughout the Midwest were lower, with Chicago Citygate spot gas falling 4.5 cents to $3.725.
Losses were seen across Louisiana and the Midcontinent as well, while in Appalachia, prices were mixed. Points along Eastern Gas Pipeline were marginally higher day/day, while Tennessee Zn 4 313 Pool dropped 3.0 cents to $3.615.
Next-day gas prices in the Northeast strengthened for a second day despite a lack of strong regional demand. Algonquin Citygate picked up 8.5 cents to average $3.835.
On the pipeline front, Overthrust Pipeline was scheduled to perform maintenance from Wednesday through Friday, limiting up to 250 MMcf/d of deliveries from Overthrust onto Kern River Gas Transmission (KRGT). The work is because of modifications associated with the Point of Rocks West Expansion.
During the maintenance event, Overthrust would not be able to deliver any gas at the Roberson Creek (meter: 10018) interstate interconnect with KRGT. Over the past 30 days, the interconnect has averaged 240 MMcf/d and maxed at 250 MMcf/ d of deliveries, according to Wood Mackenzie.
The Point of Rocks West Expansion would add 130 MMcf/d of incremental capacity between Overthrust’s Rockies Express Pipeline-Wamsutter receipt point in Sweetwater, WY. The gas would be for delivery at the KRGT Roberson interconnect in Lincoln, WY, for 90 MMcf/d and the Painter interconnect in Uinta, WY, for 40 MMcf/d. Construction reports had not been filed with the Federal Energy Regulatory Commission indicating that work had begun, according to Wood Mackenzie analyst Anthony Ferrara. “However, the maintenance event is evidence that construction is now underway and will likely meet the target in-service date of November 2021.”
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August 19, 2021 at 12:17AM
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Natural Gas Futures Reverse Course, Tumble on Weak Power Burns - Natural Gas Intelligence
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