June Nymex natural gas futures climbed with the mercury as hot weather supports cooling demand, driving prices to four-month highs.
At A Glance:
- Futures up 12.5 cents
- Strong cooling demand
- Cash gains with heat
The front-month contract settled at $2.751/MMBtu, up 12.5 cents from Friday. Momentum is driving June futures to a level not seen since late January.
Meanwhile, NGI’s Spot Gas National Avg. gained 28.5 cents to $1.930. Heat and the return of power to customers in Houston and surrounding areas who lost service after last week’s extreme weather supported regional prices.
On the weather front, Maxar meteorologist Brad Harvey said during a discussion on the online energy platform Enelyst that the forecaster was expecting 93.1 population-weighted cooling degree days over the 15-day projection period.
This is “not only above normal…but would rank as the 10th highest total for the period among national records dating back to 1950,” Harvey said.
LNG’s Return
Additionally, on the demand side, EBW Analytics’ Eli Rubin, senior analyst, said the sooner-than-expected full return of Freeport LNG catalyzed futures’ ongoing rally. Still, the seven-day average liquefied natural gas feed gas totals “languish in the 12.7 Bcf/d range,” Rubin said. NGI’s North America LNG Export Flow Tracker data showed feed gas flows at 12.31 Bcf/d.
Rubin said an ongoing outage at Cameron LNG may wrap up later this month, helping to support overall consumption. He also noted probable upturns from Venture Global LNG Inc.’s Plaquemines LNG and New Fortress Energy Inc.’s LNG in Mexico over the next 60-90 days that could reinforce long-term support for current Nymex price levels.
All tallied, the bullish demand expectations support the further tightening of the supply/demand balance as producer cuts continue.
Wood Mackenzie production scrapes showed output at 97.3 Bcf/d Monday. Production averaged 97.4 Bcf/d over the recent seven days and 98.0 Bcf/d in the last 30 days, lagging year-earlier production of around 101.7 Bcf/d.
Based on the trends, the next three U.S. Energy Information Administration (EIA) storage injection reports could be on track to show prints on the lighter side of normal to whittle down the Lower 48 surplus versus the five-year average, NatGasWeather said.
NGI modeled an 83 Bcf injection into natural gas storage facilities for the week ending May 17. Early estimates submitted to Reuters ranged from additions of 71 Bcf to 96 Bcf, with an average increase of 89 Bcf. That compares with an increase of 97 Bcf during the same week last year and a five-year average increase of 92 Bcf.
EIA data Thursday outlined a 70 Bcf injection into Lower 48 storage for the week ended May 10. The increase lifted inventories to 2,633 Bcf. Stocks remain well above the year-earlier level of 2,212 Bcf and the five-year average of 2,013 Bcf.
“Nymex futures may be approaching our estimated fair value as the most likely storage trajectory at current prices approaches the low end of our 3,900-3,950 Bcf October target,” Rubin said.
Cash Prices
Spot natural gas prices were predominantly higher on Monday, with impressive gains at more southerly locales due to weather and pipeline maintenance.
CenterPoint Energy Inc. said about 220,000 customers in its Houston territory remained powerless since late Thursday, but it had restored service to more than 291,000 customers by early Monday. The energy provider said it’s still on track for “substantial completion of power restoration” by Wednesday.
The urgency to return power to customers was exacerbated by hot weather in Texas and across large swaths of the country. NatGasWeather said both the American and European weather models forecast “rather impressive heat over Texas” through Tuesday.
Waha hub prices moved back to the plus side, up 22.5 cents from Friday to an average of 7.0 cents. SoCal Citygate deals were up in tandem, jumping 31.0 cents to $1.750.
Combining with heat in the Southeast, Southern Natural Gas (SONAT) declared a force majeure because southeast supply header maintenance would reduce available capacity to 456,000 MMBtu/d on May 21 and 22 and 482,000 MMBtu/d on May 23 from 504,150 MMBtu/d, Wood Mackenzie analyst Inigo Guerra said.
Part of the maintenance took place last week, where the cuts were equal to the reduction in capacity, reaching 58,781 MMBtu/d on May 15, Guerra said.
Guerra noted, “The same is already happening this week, with day-over-day cuts already being 72,728 MMBtu/d today,” Guerra said. For May 21 and 22, cuts would probably be around 49,000 MMBtu/d, and for May 23, around 23,000 MMBtu/d.
Additionally, late last week, Transcontinental Gas Pipe Line Co. advised shippers to expect continued restrictions at its Station 60 compressor in Louisiana.
Transco Zone 5 was 71.0 cents higher at $3.730, while Transco Zone 4 climbed 75.0 cents from Friday in heavy volume trade to an average of $3.685.
