The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 79 Bcf of natural gas into storage for the week ended Oct. 27. The result landed near expectations and sent Nymex natural gas futures higher to narrow earlier declines.
At A Glance:
- BREAKING: U.S. EIA reports 79 Bcf injection
- Weather to warm up for weekend
- Production dips slightly, LNG stays strong
Natural gas futures faltered early Wednesday, reversing much of the 22-cent jump Tuesday before bouncing and settling lower to start November trade off on wobbly footing. Weather forecasts shaved some demand expectations with the winter’s first decent cold shot across the Lower 48 set to ease by the weekend.
The December Nymex gas futures contract settled at $3.494/MMBtu, down 8.1 cents day/day. It traded to an intraday low of $3.428 early in the session. January settled 6.0 cents lower at $3.753.
NGI’s Spot Gas National Avg. fell 29.0 cents to $2.965, to extend its slide to a second day that has reversed much of Monday’s nearly 50-cent surge.
Production slowed to under 101.5 Bcf/d on Wednesday, Wood Mackenzie estimated. That pace is off peak readings last week, but the seven-day trend is flat week/week at an average of 102.1 Bcf/d, the firm said.
On the demand side, revisions to weather forecasts have whipsawed expectations. Forecasts on Monday called for milder conditions in the first half of November. This view held until early Tuesday, when models added a huge pulse of demand for the Midwest and Northeast for Nov. 9-11, which helped spark the rally in futures. But by Wednesday, the models have shed all the demand gains of the past few days.
Much of the lower expectations stem from the quick departure of this week’s blast of cold air across the northern half of the country and down into its midsection, which has boosted heating demand at the start of the winter withdrawal season. The cold is expected to ease and by the weekend, much of the country should be enjoying warmer weather. Into next week in particular, the northern United States is now modeling warmer, accounting for much of the demand losses, according to NatGasWeather.
Still, it is possible the revised weather forecast Wednesday “gave back too much demand and trends a little cooler overnight,” the firm said. “But if it doesn’t, the Nov. 4-15 pattern will be to the bearish side with most days showing well below-normal heating degree days besides near normal Nov. 9-11.”
The weekend warm-up could halve heating demand, shedding 5.1 Bcf/d of weather-driven gas use, according to EBW Analytics Group senior analyst Eli Rubin. “Although near-term momentum could extend, the December natural gas contract may be unable to sustain current levels absent a renewed cold push,” he said.
Besides weather, producers’ hedging could act as a weight on futures into early 2024, Rubin added. Haynesville pure-play producer Comstock Resources Inc. said Tuesday it wants to hedge at least 40% of its 2024 output “in a perfect world” scenario, up from 22% so far.
“In our view, other producers likely occupy a similar hedging outlook, suggesting further downward pressure in coming months as the natural gas sellers layer on protection,” Rubin said.
Meanwhile, LNG feed gas volumes remain strong, ticking up to around 14.5 Dth/d for Wednesday, above the seven-day average of around 13.9 Dth/d, according to NGI’s LNG Export Tracker.
Storage Estimates
On Thursday, all eyes shifted to the EIA storage report covering the week ended Oct. 27.
The closely followed EIA report has alternated between bearish and bullish readings. In the first week of October, a bullish miss sent futures flying above $3.000, then a week later printed near expectations. That was followed by a bearish read that sent prices reeling, then last week came in shy of expectations to send futures back above $3.000.
For this week’s report, analysts generally expect a heavier-than-normal build as production, while off its record highs, remains elevated, and late autumn only gives brief tastes of winter’s entrance.
NGI modeled an injection of 82 Bcf. That compares with a five-year average of 57 Bcf.
Injection estimates submitted to Reuters for the Oct. 27 week ranged from 76 Bcf to 88 Bcf and landed at a median of 81 Bcf. Bloomberg’s survey spanned builds of 76 Bcf to 84 Bcf with a median expectation of 82 Bcf.
EIA reported a 74 Bcf injection for the week ended Oct. 20. That increase exceeded the five-year average of 66 Bcf and the year-earlier build of 61 Bcf.
A chilly rain system descended across the Northeast and Rockies early in the week of Oct. 27, and was followed by a blast of bitter cold through the weekend that swept from the West to the Great Lakes. The Rockies faced its first production freeze-offs of the season.
As of the last EIA print, inventories stood at 3,700 Bcf, a surplus of 183 Bcf to the five-year average of 3,517 Bcf and above the year-earlier level of 3,387 Bcf.
After Thursday’s report, the EIA is not scheduled to report another inventory estimate until Nov. 13. Next week, the agency is set to complete a planned systems upgrade from Nov. 8-10, which would delay the Nov. 9 report covering the week ended Nov. 3. On Nov. 16, EIA plans to report that week alongside data for the week ended Nov. 10.
Spot Prices Pull Back
Next-day cash prices pulled back on Wednesday across most regions, reversing for a second day the weather-driven gains of last week and Monday.
Still, prices remained elevated overall as frigid temperatures have lingered across the country’s midsection this week, with freezing temperatures as far south as Dallas. A mix of morning frost and freezing cold would persist across the South, Northeast and much of the Midwest early Thursday, AccuWeather senior meteorologist Bill Deger said. For most areas, this bout of cold marks the end of the growing season and could flirt with record lows in parts of the South, he said.
But the cold spell is expected to quickly give way to a warm-up across the South Central, Southeast and Northeast Thursday to set up the weekend for above-normal temperatures, according to Deger. Milder weather was forecast from California to Colorado and the Upper Midwest, he said.
Thursday declines were steepest in the Northeast, where Algonquin Citygate spot gas fell $1.175 day/day to average $2.885, and Tenn Zone 6 200L fell $1.045 to $2.855.
In West Texas, Waha shed 43.5 cents to $2.025, while Oneok WesTex dropped 72.0 cents to $2.095.
In the Rockies, Northwest Sumas fell 94.0 cents to $4.445.
Gains were few and scattered in California, the Rockies, and Canada, led by SoCal Citygate up 80.5 cents to $7.330.
