Potentially demand-sapping events ahead of the Fourth of July holiday weekend kept pressure on August Nymex natural gas futures Monday as inventories stuck in the craw of a market looking for solid demand to vanquish a hefty surplus.
At A Glance:
- Futures crash
- Demand woes weigh
- Cash mostly tumbles
August futures settled off 12.3 cents at $2.478/MMBtu. The front-month contract ticked only a penny above the Friday settlement to a high of $2.602 and tumbled to a $2.475 low.
NGI’s Spot Gas National Avg. was off 10.0 cents to $1.63=55. Hubs in California, Appalachia and West Texas were higher against a wider retreat.
The U.S. Energy Information Administration (EIA) noted that electricity demand in the eastern and midwestern United States increased in June as a heatwave settled across the Midwest, Mid-Atlantic and Northeast regions.
The searing heat moved into July, as the latest weather outlooks continued to forecast the “hottest pattern of the past 50 years for the coming 15 days, at least in terms of national cooling degree days,” NatGasWeather said.
Meanwhile, remaining south of the United States – at least for the next week – Hurricane Beryl, the first hurricane of the 2024 Atlantic hurricane season, had the potential to damage electric infrastructure and erase heat-related demand.
The strongest hurricane ever for June, Hurricane Beryl was likely to stay south of Jamaica and hit north of Belize before emerging on the other side in the Bay of Campeche, according to the National Hurricane Center.
“At this point, it isn’t favored to impact production or LNG, but it’s still a way out,” Wood Mackenzie analysts said.
Additional news on the liquefied natural gas front included reports that Freeport LNG suffered another blip over the weekend.
Freeport staff told Texas officials that the facility’s Train 2 tripped because of compressor issues. Feed gas flows fell to about 1.6 Bcf/d Saturday and 1.3 Bcf/d Sunday, NGI data show. On Monday, service regained its earlier June pace with nominations at around 1.9 Bcf/d.
A recent series of trips, however, remained a worry for the market counting on increases in exports to help eat away domestic gas supply.
Tudor, Pickering, Holt & Co. (TPH) analysts said Monday that total LNG demand was down, “and we are seeing the lowest flows since the start of May, at 12.3 Bcf/d – 84% utilization of estimated capacity.”
The firm said multiple LNG projects saw decreases in flows. Sabine Pass LNG was down 160 MMcf/d and Cameron LNG was down 100 MMcf/d,” the firm said.
Venture Global LNG Inc.’s Calcasieu Pass was also down 150 MMcf/d. TPH analyst Justin Martin said headlines the prior week flagged the start of feed gas demand at Venture Global’s Plaquemines LNG.
TPH data showed “flows did occur, but they were negligible.” The firm was monitoring data and expecting “startup ramping in July,” Martin said.
The market also had eyes on production, anticipating that producers would increase output with additional demand and price support.
Wood Mackenzie estimates on Monday, however, showed dry natural gas production at 100.0 Bcf/d versus 102.0 Bcf/d the day before and a seven-day average of 101.3 Bcf/d.
“The top day estimate to the Spring Rock Daily Pipe Production Data” showed an about 1.98 Bcf/d day/day decline “due to the first day of the month,” Wood Mackenzie said. Day-over-day declines were concentrated in Texas and Pennsylvania.
Pennsylvania production was down about 680 MMcf/d. The firm said Transcontinental Gas Pipeline Co. LLC started a two-day maintenance event at compressor station 170, restricting about 100,000 MMBtu flow from North to South. Additionally, Columbia Gas Transmission, Dominion Transmission Inc. and Tennessee Gas Pipeline showed declines.
Texas production was down about 685 MMcf/d, with about 320 MMcf/d in the Permian Basin, 215 MMcf/d in Texas South, and about 175 MMcf/d in Texas East.
Wood Mackenzie said the decrease was concentrated along Natural Gas Pipeline Co. of America and El Paso Natural Gas, with no posted notices or scheduled maintenance.
Bullish Storage Pattern
Meanwhile, traders are expecting a scant injection of natural gas inventories when the EIA releases its latest data on Wednesday because of the Fourth of July.
NGI modeled a 29 Bcf build for the week ending June 28 versus a 76 Bcf injection for the same week a year prior and a 69 Bcf five-year average injection.
After the EIA reported a 52 Bcf injection for the prior week, total working gas supply stood at 3,097 Bcf, 314 Bcf more than the previous year period and 528 Bcf above the five-year average.
The following three EIA reports are also expected to print smaller than normal builds. NatGasWeather expects inventory surpluses to sink toward 400 Bcf.
“But clearly, this pace isn’t fast enough for many major players, or prices wouldn’t have sold off so strongly in recent weeks,” the firm said.
Cash Clobbered
Spot gas prices were mostly deflated Monday for Tuesday delivery amid weak demand resulting from the July Fourth holiday.
California’s PG&E Citygate added 29.0 cents to $3.455, bucking the predominant downtrend with weather support. Conversely, Malin slid 22,5 cents to $1.895. The California Regional Avg. was up 4.5 cents to $2.355.
The most “anomalous heat” in the latest weather forecast is in the West, Maxar’s Weather Desk meteorologist Brad Harvey said on the online energy platform Enelyst. Harvey noted numerous daily record highs were expected for places such as Sacramento, with upper 100s to near 110 possible on Tuesday, Friday, and Saturday.
Northwest Sumas led losses, sinking 68.5 cents to 86.5 cents, as the National Weather Service outlook showed comfortable low 80-degree temperatures through Friday.
