Nymex December natural gas futures settled higher on the final trade day in the truncated Thanksgiving holiday workweek, supported by a surprise withdrawal from inventories and approaching cold weather.
At A Glance:
- EIA prints 7 Bcf storage draw
- Warming follows near-term cold
- Thanksgiving holiday limits cash
The front-month contract settled Wednesday at $2.897/MMBtu, which was off from an early $2.916/MMBtu high during the session, but still represented a 5.1-cent increase over Tuesday’s finish. Trading on the day occurred on either side of the prior day’s settlement, searching for direction from the latest inventory report.
January futures followed, settling 4.0 cents higher at $3.033.
Natural gas cash markets were mixed by region, but up overall with weather forecasts for the week ahead countering lower demand expected through the extended holiday weekend. NGI’s National Spot Gas Avg. was up 18.5 cents to $2.970.
Inventories Modestly Support
The U.S. Energy Information Administration (EIA) released its weekly storage report at noon ET, a day earlier than usual because of the holiday.
The report outlined a 7 Bcf withdrawal from natural gas storage in the week ended Nov. 17. That compares with a five-year average withdrawal of 53 Bcf and a year-earlier draw of 60 Bcf.
The pull was a miss against an expected modest injection.
Ahead of the print, NGI modeled a 4 Bcf injection. Reuters’ survey produced a range from a withdrawal of 3 Bcf to an injection of 31 Bcf, with a median build of 4 Bcf. Bloomberg’s poll spanned estimates of a 9 Bcf draw to a 17 Bcf build and produced a median 3 Bcf build. The average from The Wall Street Journal’s survey came out to a 2 Bcf injection.
Participants on the online energy platform Enelyst called a 13 Bcf pull from storage in the East a “huge miss” against expectations during a post-print discussion. Below-average temperatures from Maine to North Carolina during the covered week supported the drop.
Yet, with total inventories of 3,826 Bcf, “The surpluses still increased from 203 Bcf to 249 Bcf, which isn’t exactly scary,” meteorologist Rhett Milne of NatgasWeather noted during the discussion on Enelyst.
Further, the EIA inventory report for the week ending Nov. 24 could print another single-digit build or draw that could result in the storage surplus increasing to around 285 Bcf, according to NatGasWeather.
Looking ahead to the next storage report, early estimates submitted to Reuters range from a withdrawal of 35 Bcf to an injection of 8 Bcf, with a median decrease of 9 Bcf. That compares with a withdrawal of 80 Bcf a year earlier and a five-year average decline of 44 Bcf.
Demand Mixed
National demand for heating will remain a little lighter than average through Thursday as a mild weather system exits the East, NatGasWeather said in a midday update.
But price support could return with a colder weather system set to track into the northern and central portions of the country by Friday through Sunday, followed by a colder reinforcing shot in the week ahead.
“The coming colder pattern would be more impressive if not for weather maps favoring temperatures warming to near or above normal over most of the United States from Dec. 3 to Dec. 7 for a return to light national demand,” according to NatGasWeather.
The firm sees continued volatile trade ahead of the December contract’s roll off the board at the Nov. 28 market close.
Meanwhile, Wood Mackenzie reported Lower 48 natural gas production at a near record 104.5 Bcf/d Wednesday, down from 104.7 Bcf/d the day prior. Estimates for LNG exports were at a still hefty 14.3 Bcf/d.
Holiday Prices Mixed
Natural gas cash market trading on Wednesday for Thursday through Monday flow varied due to weather and the lower demand due to the holiday.
A chilly weather system was expected to track into the northern and central United States and bring rain and snow from Friday to Sunday, according to NatGasWeather on Wednesday. Temperature lows were expected to sink into the 0s to 30s. The Plains and North Texas were forecast to see lows in the 20s and 30s, according to the forecast.
“As a result, national demand will increase to strong levels,” Milne said.
Supported by the more robust weather-related demand, the Northeast saw substantial gains led by Tenn Zone 6 200L. Deals spanned $4.300 to $10.000 and averaged $5.045 for a day/day gain of $2.030. Gains across the Northeast lifted the regional average to $5.105, up $2.230.
While other regions, including the Midwest and Midcontinent, saw spot prices rise, the gains were kept to a minimum by demand depressed by school and business closures.
Chicago Citygate posted a 13.5 cent day/day uptick to a $2.545 average, and Northern Natural Demarc added 19.0 cents to an average of $2.540.Texas markets predominantly pointed lower for the holiday package. In West Texas, Transwestern was among the day’s biggest losers, drifting down 29.0 cents day/day to an average of $1.810. Meanwhile, in East Texas, the Houston Ship Channel slipped 13.0 cents day/day to $2.300.
