Natural gas futures slid for a second session Thursday after the latest government inventory data gave bulls little ammunition to counter against light demand weather forecasts and hefty production levels. Midday weather models didn’t help either, shaving off more demand, yet bulls fought on to narrow the session’s declines.
Coming off an 8-cent decline the prior session, the December Nymex gas futures contract shed another 2.2 cents day/day and settled at $3.472/MMBtu. January declined 0.3 cents to $3.750.
Spot gas prices fell Thursday as the season’s first big taste of winter cold receded. NGI’s Spot Gas National Avg. fell 29.5 cents to $2.670.
On Thursday, temperatures rose into the 60s and 70s across much of the lower United States, while highs to the 30s and 40s persisted across the Rockies, Northern Tier and Northeast. Temperatures are expected to warm further for the weekend.
Futures initially chopped across a 5-cent range after the U.S. Energy Information Administration’s (EIA) storage report showed a build of 79 Bcf for the week ended Oct. 27. But by 11 a.m., futures had halved their early morning declines to around 3.5 cents.
Futures “have held up fairly well,” even after midday weather models revised next week’s forecasts strongly warmer, NatGasWeather said. An expected cold shot next week could now just be a glancing blow, the firm said, unlike this week’s chill that reached deep into the bottom half of the United States.
The weather models indicate bulls could have to wait at least until late November for winter to rescue them. The two major weather models indicate benign conditions may persist out to Nov. 24, the firm said.
EBW Analytics Group LLC noted that independent forecaster DTN’s week 4 forecast suggested sharply warmer temperatures in the Midwest and Northeast into Thanksgiving, with a “relatively high confidence” in the warmer pattern, and that if anything, the risks lean to the warmer direction.
Thursday production fell more than 1 Bcf day/day to under 102 Bcf/d, Bloomberg estimated. The Appalachian Basin appeared to be the main driver of the declines, with the Permian Basin and Haynesville Shale also showing significant drops.
LNG feed gas volumes rose to 14.7 Dth/d for Thursday, the highest level in more than six months, according to NGI’s LNG Export Tracker. U.S. feed gas deliveries to LNG facilities hit a record high of 14.91 Dth/d on April 17, a level not previously tested until Oct. 17 when volumes hit 14.63 Dth/d, NGI data show.
Storage Build
The EIA storage build of 79 Bcf landed well within analyst expectations. Afterward, with the front month lower, bears had the upper hand in trading through the day, but bulls managed to slow the bleeding.
Injection estimates submitted to Reuters for the week ranged from 76 Bcf to 88 Bcf with a median of 81 Bcf. Bloomberg’s survey spanned builds of 76 Bcf to 84 Bcf with a median of 82 Bcf. Expectations for the build were driven by benign weather conditions and strong gas production that notched an all-time high early in the week.
NGI modeled an 82 Bcf injection. The 79 Bcf build came in well above the five-year average injection of 57 Bcf but fell short of last year’s 99 Bcf.
That strong build a year ago makes this latest injection look thin, Mobius Risk Group analysts said.
“Considering degree days were similar for the reference week in question and the same week last year, it would be hard not to categorize a low 80s build as undersupplied on a weather adjusted basis,” the analysts said. “This dynamic has been at play for months and yet the market is relatively unconcerned with winter upside risk/opportunity.”
Mobius noted the withdrawal season may have already technically begun with this week’s cold blast. Indeed, expectations for the week were split between drawdowns and additions.
Early estimates submitted to Reuters ranged from a withdrawal of 21 Bcf to an injection of 79 Bcf, with an average of 21 Bcf for the week ending Nov. 3.
But the market is faced with the unusual situation of having to wait an extra week to find out the results of the next storage report. EIA is planning a systems upgrade for Nov. 8-10, which would delay the next report for the week ended Nov. 3. On Nov. 16, EIA plans to report for the weeks ended Nov. 3 and Nov. 10.
Physical Prices
Cash prices fell for a third session Thursday to give back more of their gains last week and Monday. This week’s frigid cold is releasing its grip on much of the country.
Prices fell fastest in the Rockies and Northeast. Kingsgate spot gas plunged $1.780 day/day to average $3.070. Algonquin Citygate fell $1.060 to $1.825.
Appalachia followed in the pace of declines. Tenn Zone 4 200L dropped 43.5 cents to $1.710.
Prices also fell across the Midwest and Texas. Chicago Citygate down 19.5 cents to $2.545. Waha fell 23.5 cents to $1.890.
The benchmark Henry Hub prices averaged $3.115 after falling 7.0 cents on the day.
After parts of the United States saw their first snow and taste of winter this week, much of the eastern and southern portions of the country could see a “mega temperature rebound” this weekend, forecaster Accuweather said. Overall temperatures will swing 25-50 degrees warmer this weekend from chilly lows Wednesday and Thursday, its senior meteorologist Alex Sosnowski said.
“The bulk of the warmup and dry weather will be centered on the weekend for most areas,” he said.
Next week, the cold will return across the Midwest and Northeast, but now it is modeling as “just a glancing shot and not advancing nearly as deep into the United States as the data showed Tuesday,” NatGasWeather said. “But it does linger a day longer…”
Further out, the latest modeling forecasts “warmer-than-normal temperatures gradually gaining over large stretches of the United States Nov. 12-16 for a return to lighter-than-normal national demand,” the firm said.
