Natural gas futures prices ended the week on firmer ground as a chillier March outlook and the continued ramp of a key export facility supported the market. The March Nymex gas futures contract expired Friday at $2.451/MMBtu, up 13.7 cents from Thursday’s close. The April contract – which moves to the front of the curve on Monday – settled 11.6 cents higher at $2.548.
At A Glance:
- Chilly March in the cards
- Storage surplus may shrink
- Cash drops as storm exits
Spot natural gas prices moved in the opposite direction. Led by steep declines on the West and East coasts following a major winter storm, NGI’s Spot Gas National Avg. dropped 59.5 cents to $4.360.
With yet another passing storm in the rearview mirror, futures traders looked ahead to the potential for more cold to close out the winter season. The latest models indicated that demand would be near to above normal for the next eight to 15 days, particularly over the northern United States during from March 7 to 11.
It remains to be seen if the development of blocking in the high latitudes can send colder-than-normal temperatures deep into the Lower 48 for March 7-15, according to NatGasWeather. However, the latest longer-range projections have moved more adamantly in the colder direction toward the middle of March.
“Confidence that far out is low,” NatGasWeather said. “But this is as cold as we have seen these longer-range projections all season long, so risk does appear to be growing for a chilly period around the middle of the month.”
Weather aside, there are other signs the market may be on the cusp of a shift in direction.
For one, with natural gas prices in the $2.00 range, coal is being pushed out of the power generation market in favor of gas. This has helped to boost power burns when weather alone doesn’t lend much support.
Freeport LNG also is slowly returning to full operations, with the export terminal on the upper Texas coast taking in close to 700,000 Mcf/d of feed gas on Friday. Though the facility’s return may not pack the same punch as it would have had it ramped up in December or January, the 2 Bcf/d of feed gas demand it eventually will take should aid in improving balances.
EBW Analytics Group noted that the market appears to be still discounting Freeport’s return, though not entirely without reason. However, with the potential for record liquefied natural gas feed gas demand within 30-45 days, this may help to drive mild deficits relative to normalized five-year average storage trends.
For now, though, stocks are on pace to end the withdrawal season at record highs following an overall warm winter.
The Energy Information Administration (EIA) said stocks as of Feb. 17 stood at 2,195 Bcf, which is 395 Bcf higher than year-ago levels and 289 Bcf higher than the five-year average. This was after a 71 Bcf withdrawal that continued the trend of modest pulls during what is typically one of the peak winter months.
What’s more, analysts expected yet another small withdrawal in the upcoming EIA report. Tudor, Pickering, Holt & Co. said its preliminary modeling pointed toward a draw of 60 Bcf for the week ending Feb. 24. This would compare with the five-year average withdrawal of 134 Bcf.
Beyond then, however, it appears that risk for March to be overly warm has lowered based on the latest weather models. If cold can hold, and sustain itself deeper into March, end-of-March storage levels could be pulled back under 1.9 Tcf, NatGasWeather noted.
“The developing blocking pattern should give this colder turn a better chance to verify, but it is not a guarantee,” the forecaster said. “Confidence will increase if we see the colder pattern progress into the six- to 10-day window in next week’s guidance.”
Cash Quickly Plummets
As quick as the latest winter storm hit the Lower 48, so too was the freefall in spot natural gas prices.
In the battle for who took the top prize for deepest cuts to prices, the Northeast was victorious. New England’s Tenn Zone 6 200L cash plunged $3.740 day/day to average $12.340 for gas delivery through Monday. Algonquin Citygate spot gas tumbled $3.145 to $12.300.
The swift declines occurred even as temperatures were forecast to plummet below zero in northern New England on Saturday morning, and into the single-digits and teens over parts of the central Appalachians and southern New England.
What’s more, the East Coast should only see a brief reprieve from the stormy pattern. The monster storm that slammed Southern California at the end of the week was set to arrive in the Northeast by Monday or Tuesday.
“This is likely to be the biggest storm of the season to date for central New England, including the Boston area and northern parts of Connecticut and Rhode Island,” AccuWeather senior meteorologist Joe Lundberg said.
Several inches to perhaps a foot of snow could be unleashed from the storm should it develop to its full potential. Meanwhile, yet another storm would likely roll along during the latter half of next week, according to AccuWeather.
Meanwhile, California turned into a winter wonderland on Friday, with schools closed in parts of the state and kids enjoying a rare day of eating snowflakes and making snow angels. However, given the weekend dip in demand, spot gas prices plummeted in the region.
SoCal Citygate cash dropped $2.080 day/day to average $11.820 for the three-day gas flow. Malin fell $1.645 to $11.285.
Sharp price discounts extended into the Desert Southwest and Rockies as well. KRGT Del Pool was down $2.075 to $12.490, and Northwest Wyoming Pool was down $2.700 to $11.900.
The wild swings were in stark contrast to the rest of the country. For example, Henry Hub climbed 16.0 cents on the day to average $2.345. The Chicago Citygate slipped 6.0 cents to $2.220.
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February 25, 2023 at 05:44AM
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March Nymex Natural Gas Futures Expires Higher; Can Cold Endure to Keep Momentum Going? - Natural Gas Intelligence
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