A soggy, chilly end to October sent spot natural gas prices sharply higher for the shortened Oct. 25-28 trading period, which covered gas delivery through Oct. 31. Gains of nearly $1.00 were the norm, lifting NGI’s Weekly Spot Gas National Avg. up 72.5 cents to $5.575/MMBtu.
Nymex futures, however, plummeted on the week as an early November cold snap was expected to quickly dissipate, paving the way for another stretch of low demand. Although the November contract expired at $6.202, the December contract settled Friday at $5.425, off 63.0 cents from Monday’s close.
Locations out West put up the most substantial price gains for the cash markets as a couple of storms plowed through the region beginning late last week, causing strong winds, record rainfall and power outages. The second and more powerful storm hit California as a bomb cyclone on Oct. 25 and 26, packing a central pressure that was the equivalent of a Category 4 hurricane.
The chilly temperatures in the wake of the storms boosted gas prices throughout the region. SoCal Citygate cash averaged 51.5 cents higher on the week at $6.595, and Malin spiked up 66.0 cents to $5.730. In the Rockies, Northwest S. of Green River spot gas prices jumped $1.005 week/week to average $5.635.
Hefty gains also accumulated on the East Coast, as the same bomb cyclone that hit the West Coast was set to make its way through Appalachia to the mid-Atlantic and to New England by Sunday. Though the storm has weakened considerably, it follows a Nor’easter that dumped several more inches of rain during the week. It also is expected to bring along more strong winds that could increase the number of power outages in the region.
With the spike in demand, Eastern Gas South spot gas prices shot up 89.0 cents on the week to average $5.130 for the Oct. 25-28 trading period. Transco Zone 6 NY was up 94.0 cents to $5.265.
The seemingly endless summer weather along the Gulf Coast finally came to an end late in the week. However, not before stifling humidity and 90-degree highs boosted air conditioning needs throughout the region. Henry Hub spot gas prices averaged $5.665 for the Oct. 25-28 period, up 74.0 cents week/week. Katy jumped 70.5 cents to $5.515.
The rest of the country followed suit given the sweeping storms and bump in demand.
Futures Weaken, But Will It Last?
Futures prices have toyed with the $6.00 mark on numerous occasions over the past month, with Wednesday’s November expiration at $6.202 perhaps the most convincing of its staying power.
However, since then, it has been a one-way street for Nymex futures. The December contract debuted at the front of the curve by plunging 41.6 cents down to $5.782.
Though weather models continue to portray a return to milder weather once the early November cold snaps exit the United States, the dramatic sell-off likely also has to do with the sharp downturn in prices in Europe.
Dutch Title Transfer Facility prices posted two consecutive days of losses at the end of the week on word that Russia could begin refilling European storage as soon as Nov. 9. Though the Kremlin previously has alluded to increasing supplies to the region, optimism appears to be growing that supplies could improve ahead of colder weather.
This has some ripple effect into U.S. markets, according to Bespoke Weather Services. The firm pointed out that it lowers the price the United States would need to compete with in the event that a crazy cold-enough winter materializes on the home front, necessitating a pricing out of LNG. This is unlikely, “but not a ‘zero’ risk, either.”
For now, weather models have struggled to reflect sustained cold over the next month. The first week of November is likely to be chilly, but a quick warmup is expected thereafter. Bespoke said production also moved notably higher this week, though so did liquefied natural gas volumes.
“Weather in the middle third of November should be a market mover next week, and we still like the warmer idea in that time frame,” Bespoke said. “But it does not carry high confidence, to be fair, as there are hints that blocking could re-emerge rather quickly in a couple of weeks.”
If Bespoke’s forecast is correct, however, prices could still move lower early next week. Should models surprise and go colder, a significant rally back higher could result.
That said, the U.S. market’s supply situation is far better than in Europe. Though storage struggled to be replenished throughout the summer, a string of larger-than-normal injections over the past month have vastly improved inventories.
On Thursday, the latest Energy Information Administration (EIA) storage data showed further improvement in supply. The EIA said stocks rose by 87 Bcf for the week ending Oct. 22, to 3,548 Bcf. This is still 403 Bcf below year-ago levels but only 126 Bcf below the five-year average, with another week to go in the traditional injection season and possibly another one or two builds thereafter.
Broken down by region, the South Central reported a 36 Bcf increase in stocks, including a 21 Bcf addition to salt facilities and 15 Bcf to nonsalts, according to EIA. Midwest inventories were up by 25 Bcf, and the East was up by 23 Bcf. The Pacific and Mountain regions each notched single-digit increases in storage.
“Considering next week’s build is shaping up to be between 50 and 60 Bcf, it is reasonable to expect a pre-withdrawal season starting point of 3.6 Tcf,” said Mobius Risk Group.
With mild weather returning in about a week, the December contract continued to lose steam on Friday. The prompt month closed out the week at $5.426, off 35.6 cents from Thursday’s close.
More Big Cash Losses
Amid a mostly pleasant backdrop of daytime temperatures in the 60s to 80s, spot gas prices across the country continued to fall on Friday. Trading on Friday was for gas delivery on Monday, Nov. 1.
The West Coast put up some of the largest decreases as the region emerged from a series of storms that pummeled the region over the past week. NatGasWeather said another storm was forecast to hit the Pacific Northwest in the coming days, but the system is “rather mild.” Temperatures are expected to reach the 50s and 60s, with few areas to see below-freezing overnight lows.
SoCal Border Avg. spot gas prices tumbled 54.5 cents to $5.485 for Monday’s gas delivery, while Northwest S. of Green River slid 62.5 cents to $4.980.
In Texas, Waha cash prices were down 37.5 cents to $4.880, and in Louisiana, Transco Zone 3 was down 28.5 cents to $5.230.
Spot gas prices throughout the Midcontinent and Midwest came off 20.0-30.0 cents for the most part. Similar declines extended into the Southeast and Appalachia.
The National Weather Service said high temperatures across the South behind a late-week weather system would be unseasonably cool in the coming days. Highs would reach only the 50s and 60s for the next several days.
Cash was mixed in the Northeast, where Algonquin Citygate picked up 7.5 cents to average $4.900, and Transco Zone 6 NY plunged 32.5 cents to $4.350.
On the pipeline front, Tennessee Gas Pipeline (TGP) scheduled a wrinkle bend replacement from MLV 121-2 to MLV 121-2A beginning Monday and continuing through Nov. 7. The maintenance is set to decrease operational capacity at ZONE3 in Kanawha, WV, to 380,000 MMBtu/d.
This would result in a potential maximum cut of 529,296 MMBtu/d, according to Wood Mackenzie. TGP has notified customers that the pipeline section would be out of service, and primary in-the-path restrictions are possible.
Despite the potential for the 529,296 MMBtu/d cut, Wood Mackenzie analyst Kara Ozgen said it is important to note that this same location had maintenance for almost two weeks last month, and TGP anticipated a major impact to flows. “In contrast, the restriction in operational capacity did not actually restrict flows.”
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October 30, 2021 at 05:42AM
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Wicked Storms Send Natural Gas Weekly Spot Prices Screaming Higher - Natural Gas Intelligence
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