Natural gas futures rise again, but price gains appear to be ‘stretching the rubber band pretty tight’
Natural gas futures soared again on Wednesday as weather patterns shocked the market with another move to the colder side. With the possibility of temperatures well below normal in early March, the short-term Nymex gas futures contract climbed 41.1 cents to $4.717/MMBtu. April jumped 33.1 cents to $4,572.
In short :
- Early March saw much colder
- Storage deficits to be digged
- Cash strengthens before the storms
Spot gas prices extended their gains another day outside the Northeast, where prices continued to retreat from recent highs. NGI’s Spot Gas National Avg. climbed 14.0 cents to $4.215.
Weather continues to be the focus of the gas market, even though it is the time of year when traders typically close the book on winter. It was only last week that this seemed to be the case, as the long-term forecast reflected an increasingly soft trend for late February and early March.
However, this warm outlook has changed drastically over the weekend and is steadily trending cooler over the coming weeks. NatGasWeather said that after the overnight data added even more chill to the forecast, he wondered if the changes were “too cold, too fast”.
However, the global midday forecast system added even more heating degree days by shortening the warming forecast for the southern and eastern United States early next week, while moving slightly colder with weather systems in the north and center of the country. February 24- March 2.
“Obviously, the cooler trends are bullish in the context that they will ensure that the upcoming deficits near 250 billion cubic feet will increase further in early March,” NatGasWeather said.
Another draw of 200 Bcf?
The Energy Information Administration (EIA) is expected to release the next U.S. inventory report at 10:30 a.m. ET Thursday, with estimates close to another drawdown of 200 billion cubic feet. If such a drop is realized, it would be the fifth consecutive decline in stocks of more than 200.
Ahead of the report, a Bloomberg survey showed pullback projections of 182 Bcf to 204 Bcf, with a median pull of 199 Bcf. A Wall Street Journal poll reflected lighter estimates as low as 176 billion cubic feet, with a median of 195 billion cubic feet. Reuters polled 16 analysts, whose estimates ranged from drawdowns of 160 billion cubic feet to 208 billion cubic feet, with a median estimate of 196 billion cubic feet. NGI modeled a shrinkage of 189 billion cubic feet.
The EIA report covers the week ending Feb. 11, with the actual pull comparing to last year’s drawdown of 227 billion cubic feet for the similar week and the average draw of 154 billion cubic feet over five. years.
Total working gas in storage as of Feb. 4 was 2.101 billion cubic feet, 441 billion cubic feet below year-ago levels and 215 below the five-year average, according to the EIA.
NatGasWeather noted that potentially lingering wintry weather in the eastern half of the country has reversed the freefall in gas prices of the past week. With prices up nearly 80 cents in recent sessions, “obviously natural gas markets are applauding the additional demand,” the forecaster said. “Are the cooler trends enough for prices to retest $5?”
Meanwhile, EBW Analytics Group said traders appeared to be turning a blind eye to further export demand gains. The company noted that feed gas demand from liquefied natural gas (LNG) export facilities in the United States exceeded 13.0 Bcf/d in five of the past six days for the first time.
The incremental increases come as the Calcasieu Pass terminal continues to ramp up, with Wednesday’s consumption expected to reach a new daily record north of 0.4 Bcf/d, according to EBW. At the same time, the volumes transported fluctuated at Sabine Pass, where the sixth production unit completed its commissioning. EBW noted that the higher total capacity at Sabine Pass allowed a lower capacity factor to deliver “impressive” volumes.
“While national single-day records reached over 13.4 billion cubic feet/d, non-coincident volumes (taking the individual daily maximum for each individual facility) now extend to 13.9 billion cubic feet/d,” said EBW principal analyst Eli Rubin. “In our view, this higher figure of 13.9 Bcf/d seems to have been largely overlooked and suggests upside potential if the operational performance of the entire fleet aligns and Calcasieu Pass continues to increase. admission volumes.”
Cash rises on windy outlook
Spot gas prices continued to climb mid-week ahead of volatile weather systems expected to move across the eastern half of the country.
AccuWeather said severe weather was unfolding on the warmer edge of a robust storm system, with torrential rain, heavy snow and strong winds expected through the end of the week. Winds could blow up to 70 mph, the forecaster said, anywhere from east Texas to east Kentucky and Tennessee.
While temperatures along the Gulf Coast were expected to hit 70s and even 80s on Thursday, they could drop to 30s by Friday morning, according to AccuWeather meteorologist Jessica Storm. Thunderstorms could continue throughout the day on the northeastern Gulf Coast, as well as in the southern Atlantic and mid-Atlantic regions.
The East Coast should remain balmy, but gusty winds were expected Thursday night in New York. They are then expected to spread to New England by early Friday before bringing in much colder temperatures.
Volatile weather conditions pushed up spot gas prices across most of the country on Wednesday. Transco’s Zone 3 overnight gas climbed 15.0 cents to $4.335, and Florida’s Zone 3 gas edged up 12.5 cents to $4.425.
Midwest and Midcontinent prices posted larger gains. Chicago Citygate veered 32.5 cents to $4,320 on average, while Ventura rose 36.5 cents to $4,350.
In the Rockies, Cheyenne Hub spot gasoline rose 31.0 cents to $4,205. In Northern California, PG&E Citygate posted the region’s only decline, as cash fell 9.5 cents to $4,810.
On the pipeline front, Natural Gas Pipeline Co. of America (NGPL) alerted customers that a force majeure event will take effect Thursday, resulting in the unavailability of the Houston Pipeline (HPL) intrastate interconnection at Liberty, TX. NGPL has discovered a possible leak at this location, so force majeure should be in effect for as long as it takes to fix the problem.
Over the past 30 days, NGPL has delivered a maximum of 109,078 MMBtu/d and an average of 78,461 MMBtu/d to HPL, according to Wood Mackenzie. Based on Wednesday’s gas day hourly cycle, the reduction in day-to-day flows would be equivalent to approximately 75,000 MMBtu/d.