Utilities injected 97 Bcf of natural gas into storage for the week ended Oct. 13, bolstered by a big boost in South Central supplies, the U.S. Energy Information Administration (EIA) reported on Thursday.
At A Glance:
- BREAKING: U.S. EIA reports 97 Bcf injection
- Production holds atop 102 Bcf/d
- U.S. LNG demand proves strong
Natural gas futures found fresh footing early Wednesday, rising 8.0 cents in morning trading, but prices ultimately slumped and the prompt month extended a losing streak to six sessions. Weather forecasts showed more demand in coming weeks and LNG feed gas volumes held strong, but abundant supplies countered.
The November Nymex gas futures contract shed 2.3 cents day/day and settled at $3.056/MMBtu.
NGI’s Spot Gas National Avg. gained 20.0 cents to $2.405, extending a week-to-date rally.
Production hovered around 102.5 Bcf/d and near record levels above 103 Bcf/d reached earlier in the week, according to Bloomberg’s estimates Wednesday. Maintenance work in the Permian Basin, the engine of recent volume gains, triggered the modest downward production revision.
On the demand side, meanwhile, NatGasWeather said forecasts Wednesday showed that, following light national demand through Saturday, a “bump” in demand is expected beginning this weekend and continuing through the first two trading sessions of next week as cool air blows through the Great Lakes and Northeast. Both are key gas-consuming regions.
Further out, much of the East should see seasonal conditions over the final days of October, but swaths of the West, from the Rockies to the Pacific Northwest, could see multiple cool shots, the firm said. Broader bouts of cold are expected in November.
EBW Analytics Group estimated increased cumulative natural gas demand compared to expectations to start the week. This reflected a combination of supportive heating demand trends and “increases in power sector coal-to-gas switching” over the coming weeks on lower natural gas prices, according to senior analyst Eli Rubin.
What’s more, he said, liquefied natural gas demand is “robust, with the seven-day average climbing above 100 Bcf/week for the first time since April,” Rubin added.
Repair and upgrade work culminated at multiple export facilities in recent days, bringing capacity back online and boosting feed gas demand. At the same time, buyers in Europe and Asia are fortifying supplies and calling for U.S. LNG ahead of winter.
However, supplies of LNG out of Australia, in question amid recent threats of a strike at two Chevron Corp. export plants, looked less vulnerable after labor unions late Tuesday halted plans to walk off the job. Offshore Alliance, which represents unions, said workers accepted Chevron’s proposed settlement on improved compensation and working conditions. Concerns about supply interruptions in Australia had raised concerns about shortages and sent European prices surging in recent sessions. This added bullish sentiment for U.S. futures in prior sessions.
Additionally, on Wednesday, President Biden visited Israel amid the ongoing war between the American ally and militant group Hamas. The conflict necessitated the closing of an important Israeli gas field this month. Following a deadly blast at a Gaza City hospital this week, tensions and uncertainty mounted about further potential interruptions to fuel flows amid widespread violence in the Middle East. Biden traveled to the region to try to limit wider escalation.
“We’ve got a lot of moving parts right now, and I think the market is seeing balance, with LNG strong but production also robust,” StoneX Financial Inc.’s Thomas Saal, senior vice president of energy, told NGI. “That’s keeping futures in check until we actually see that colder weather settle in and really drive heating demand.”
Storage Views
The market shifted its attention to the EIA’s Thursday storage report covering the week ended Oct. 13, Saal said.
Analysts were generally expecting a seasonally light build that would compare bullishly with the historical average.
NGI modeled a 79 Bcf increase. That compares with a five-year average of 85 Bcf.
Estimates submitted to Reuters ranged from injections of 76 Bcf to 100 Bcf, with a median increase of 80 Bcf. Bloomberg’s poll landed at a median of 81 Bcf, with injection estimates spanning 76 Bcf to 91 Bcf.
EIA reported an injection of 84 Bcf for the week ended Oct. 6. That fell short of the five-year average build of 93 Bcf. But it increased inventories to 3,529 Bcf, putting stocks well above the year-earlier level of 3,213 Bcf and the five-year average of 3,366 Bcf.
“Everyone always wants to know if we have enough gas in storage,” Saal said. “Right now, it looks like we have plenty.”
Cash Prices
Spot gas prices strengthened on Wednesday – as they did each of the two prior sessions amid expectations for colder conditions.
NatGasWeather said much of the country would warm to near or above-normal high temperatures between Wednesday and Saturday, creating mild conditions and dampening demand.
But the firm said a weather system over the Rocky Mountains and Midwest could “tap colder Canadian air and track across the Great Lakes and Northeast Sunday-Tuesday, with showers and highs of upper 40s and 50s,” galvanizing heating demand that could offset comfortable conditions elsewhere.
Another “cool shot will sweep across the northern U.S. Oct. 29-31, with highs of 40s-50s,” ushering in more demand.
Gains were spread across several regions Wednesday. Cheyenne Hub in the Rockies jumped 32.5 cents day/day to average $2.245, while Chicago Citygate advanced 24.5 cents to $2.325.
In the Northeast, PNGTS picked up 24.5 cents to $ 2.405, and Iroquois Zone 2 rose 23.0 cents to $2.285.
In Texas, meanwhile, Waha gained 19.0 cents to $1.955, and Katy spiked 38.5 cents to $2.460.
On the hurricane front, AccuWeather said Tropical Storm Norma had developed over the East Pacific and, as of Wednesday, appeared likely to become the season’s next hurricane later this week or early next as it heads toward Mexico.
“Initially, Norma may track toward the west or north for a time. However, steering breezes will eventually direct the system to the northeast and back toward the western coast of Mexico, perhaps as a potent hurricane,” Alex Sosnowski, AccuWeather meteorologist, said in a report.
Sosnowski said heavy rain and winds could impact Mexico before tracking into Texas, New Mexico and potentially Oklahoma and the central Plains.
