Natural gas futures stumbled to start the trading week amid rising production levels and milder demand forecasts from the cooling effects of Hurricane Debby.
At A Glance:
- Hurricane Debby hits western Florida
- Seven-day average output nears 103 Bcf/d
- Production approaches summer highs
The September Nymex contract settled at $1.942/MMBtu, down 2.5 cents day/day.
Meanwhile, NGI’s Spot Gas National Avg. fell by 1.0 cent to $1.655. Gains in California, the Southeast and West Texas were offset by declines in other regions.
The modest move lower in natural gas futures contrasted with turmoil across global markets Monday. Oil traded down to a six-month low before regaining its footing, rattled by geopolitical risks in the Middle East and a global equity rout, according to Mizuho Securities USA LLC’s Robert Yawger, director for Energy Futures.
“Natural gas prices are holding up pretty well today when compared to massive moves lower in most other equity and commodity markets as recession fears increase,” NatGasWeather said. Of course, natural gas had already endured its own heavy losses over the past six weeks, the firm noted. The prompt month settlement Monday was down 38% from its summer high in mid-June.
Rising production levels have been a major weight on gas prices this summer. That trend continued with production holding above 103 Bcf/d over the weekend, according to Wood Mackenzie estimates. The seven-day pace sped up by 0.5 Bcf/d to 102.9 Bcf/d week/week. Monday was estimated at 102.6 Bcf/d.
The rebound in supply has come as milder forecasts dull some of late summer’s bite into gas storage surpluses.
In the immediate term, weather-driven demand for gas has been solid. “Power burns continue to come in strong at 52.1 Bcf/d,” Wood Mackenzie analysts said.
Also running higher has been demand for LNG feed gas, which held onto last week’s strength to hold between 13.1 Bcf and 13.2 Bcf Saturday to Monday, according to NGI data.
The Freeport liquefied natural gas terminal in Texas has been running at its fastest pace in more than a year. Cheniere Energy Inc.’s Sabine Pass LNG in Louisiana, the largest North American LNG terminal, has been running strong as well, above 4.4 Bcf/d, with its maintenance wrapped up.
Venture Global LNG Inc.’s Calcasieu Pass remained a drag on overall LNG demand, with flows at more than 1.2 Bcf/d on Monday, or just 58% of capacity.
Storm Watch
Debby made landfall in western Florida as a Category 1 storm early Monday before weakening into a tropical storm, bringing strong winds, rains and flooding. About 230,000 customers in the Big Bend region of Florida were without power as of 4 p.m. ET Monday, according to PowerOutage.us.
Drenching rains of up to 18 inches were forecast for Florida and up to 30 inches in Georgia and North Carolina, according to the National Hurricane Center (NHC). “Potentially historic heavy rainfall” across southeast Georgia and the coastal plain of South Carolina through Saturday morning “will likely result in areas of catastrophic flooding,” NHC said.
Debby’s cooling of the Southeast helped shed 5 cooling degree days (CDD) of demand from the European weather model, NatGasWeather said.
Ahead of that cooldown, widespread heat was expected to drive strong demand through Tuesday as most of the country saw highs in the 90s and 100s, NatGasWeather said. Its data showed CDD demand moderating to seasonal normal levels by early next week. Greater portions of the Midwest, Plains, Ohio Valley and Northeast could cool into the 60s and 70s by this weekend and into next week as “weather systems track deeper into the U.S.,” the firm said.
Debby could also reduce feed gas demand at Elba Island LNG in Georgia mid-week, according to EBW Analytics Group’s Eli Rubin, senior analyst. The terminal was scheduled to receive about 351 MMcf of feed gas on Monday, NGI data show.
The storm’s likely impact of 5-7 Bcf of lost power demand “is part of a 40 CDD collapse in the August weather forecast over the past 10 days — largely dashing hopes for a weather-driven recovery in gas prices,” Rubin said.
Storage Views
Looking ahead to the next U.S. Energy Information Administration (EIA) storage report on Thursday for the week ended Aug. 2, early estimates submitted to Reuters ranged from builds of 11 Bcf to 39 Bcf, with an average increase of 30 Bcf.
NGI modeled a 30 Bcf injection. That compares with a five-year average increase of 38 Bcf and a year-ago increase of 25 Bcf.
The EIA reported an injection of 18 Bcf natural gas into storage for the week ended July 26. It was below the five-year average build of 33 Bcf. Still, the print left inventories at 3,249 Bcf, or 441 above the five-year average, according to EIA.
The storage surplus has been reduced by 191 Bcf since the beginning of the injection season as all but three of the weekly builds lagged the historical pace, EIA data show. For the remaining 14 weeks left in the injection season, the Lower 48 over the past five years has added an average of around 900 Bcf, EIA data show.
Spot Prices Mixed
Next-day physical cash prices were mixed across North America on Monday as milder weather sent prices lower in most regions.
The exceptions to that weakness were California, the Southeast and West Texas.
Waha rose $1.005 day/day to average at negative 14.0 cents, while SoCal Citygate gained 13.0 cents to $2.900.
Seeing mixed price movements in their respective area, the E. TX Regional Avg. fell 2.0 cents to $1.735 and the Rocky Mtns. Regional Avg. slipped 5.0 cents to $1.585.
The Electricity Reliability Council of Texas (ERCOT) may see record summer generation over the next seven days, Criterion Research Vice President of Research James Bevan said on the online platform Enelyst. ERCOT projects daily generation levels of 69.5 GW. Adding to gas power demand, wind generation was expected to be weaker between 5-10 GW on peak demand days, he said.
Production in the Permian Basin and Haynesville Shale was strong over the weekend, Bevan said. Indicative of that strength, Permian interstate pipeline nominations rose to a record 5.99 Bcf/d on Sunday, he said.
In New England, Algonquin Citygate dropped 28.5 cents to $1.490. Maxar’s Weather Desk’s six- to 10-day outlook swept in cooler conditions across the northern states into the Northeast. Likewise, in the 11- to 15-day timeframe, temperatures for the Northeast were revised lower to be in line with seasonal averages, Maxar said.
