Weekly natural gas prices fell at a majority of locations during the Thanksgiving holiday-shortened week as the easing of maintenance in Texas loosened supply to the west and the coming return of wintery weather was not in time to lift prices beyond the eastern regions.
NGI’s Weekly Spot Gas National Avg. for the Nov. 20-22 period fell 2.0 cents to $2.850. The trading week was cut short to three days by the holiday.
Prices surged on Monday in West Texas, with some hubs rebounding from negative traded levels. Maintenance was scheduled to ramp down on the Gulf Coast Express (GCX) system, while early commissioning of flows on the Permian Highway Pipeline LLC (PHP) had analysts watching for extra supply of Permian Basin gas westward.
On Tuesday, South Texas next-day prices led gainers ahead of cooler-than-usual temperatures across Texas, the Midwest and interior southern states. On Wednesday, when trade was for the Thursday to Monday period, prices surged in the Northeast ahead of winter taking firm grip there and in the middle of the country over the weekend.
Declines were seen widely across California, South and East Texas, the Rockies, Midwest and Southeast. SoCal Citygate led the way lower, down $1.305 week/week to average $5.000.
Elsewhere, Northwest Sumas fell 86.0 cents to $4.530, while Chicago Citygate shed 7.5 cents to $2.440.
Gains were concentrated in the Northeast, Appalachia and West Texas. Algonquin Citygate rose 76.5 cents to $3.525. Transwestern added 56.0 cents to average $1.925.
Futures, meanwhile, struggled early in the week as they were unable to shake off a surprisingly stout 60 Bcf storage build reported Nov. 16. The bleeding stopped Wednesday after a bullish 7 Bcf withdrawal print surprised against expectations for a modest injection for the week ending Nov. 17.
The December Nymex contract settled at $2.897 on Wednesday, up 5.1 cents on the day but down 2.1% from the prior week’s finish. Month-to-date, the prompt month is down 67.8 cents, or 19%.
Winter’s return also lent support Wednesday. Forecasters anticipated the frigid cold would linger over the northern half of the country and keep demand strong through the end of November..
Is Winter Over Already?
Into December, weather models favored “temperatures warming to near or warmer above normal over most of the United States Dec. 3-7 for a return to light national demand,” NatGasWeather said.
The risk to that warmer outlook, however, was that the models “might have trended too warm and could add a few heating degree days (HDD) back in time,” just as they did for the earlier warmer outlooks for November, the firm said.
The two major weather models show December trending mild to cool over the northern half of the country with highs in the 20s to 50s, while southern areas could see highs in the 40s to 70s and some in the 80s, according to the firm. A warm December would follow the oft-cited correlation between the ongoing El Niño weather pattern and mild winter temperatures in the northern United States.
The caveat to those forecasts is that “weather is notoriously fickle and forecasts beyond 15 days” can be uncertain, EBW Analytics Group analyst Eli Rubin said. He noted “a warm December combined with robust supply could spell disaster for natural gas.” Still, “it is foolish to call the end of winter now and ‘known unknowns’ can swing the market in either direction.”
Adding to the weather's bearish tilt to fundamentals was the abundance of supply. Lower 48 production is pacing near all-time highs above 105 Bcd/d despite a drop in rig counts and producers’ planned discipline. In addition, Canadian imports are running 1 Bcf/d ahead of a year ago.
That wave of supply has led some to plump up earlier estimates for end-of-winter storage levels between 1.6 Bcf and 1.8 Bcf.
In the middle of that range was Criterion Research LLC with an end-of-winter estimate of 1.71 Tcf. But with the recent surge in production and a weak start to the winter season, the firm has raised its end-of-season guidance to 1.87 Tcf, said James Bevan, vice president of Research, on the online platform Enelyst.
If production strength continues and summer gas demand underperforms, storage levels could rise above 4 Tcf by end of the summer season, he said. “While we feel like that number won’t happen, it’s hard to shift it lower until we start seeing production trend lower,” Bevan told Enelyst participants.
Holiday Prices Mixed
Natural gas cash market trading on Wednesday for Thursday through Monday flow varied due to weather and the lower demand due to the holiday.
A chilly weather system was expected to track into the northern and central United States and bring rain and snow from Friday to Sunday, according to NatGasWeather on Wednesday. Temperature lows were expected to sink into the 0s to 30s. The Plains and North Texas were forecast to see lows in the 20s and 30s, according to the forecast.
“As a result, national demand will increase to strong levels,” NatGasWeather meteorologist Rhett Milne said.
Supported by the more robust weather-related demand, the Northeast saw substantial gains led by Tenn Zone 6 200L. Deals spanned $4.300 to $10.000 and averaged $5.045 for a day/day gain of $2.030. Gains across the Northeast lifted the regional average to $5.105, up $2.230.
While other regions, including the Midwest and Midcontinent, saw spot prices rise, the gains were kept to a minimum by demand depressed by school and business closures.
Chicago Citygate posted a 13.5 cent day/day uptick to a $2.545 average, and Northern Natural Demarc added 19.0 cents to an average of $2.540.
Texas markets predominantly pointed lower for the holiday package. In West Texas, Transwestern was among the day’s biggest losers, drifting down 29.0 cents day/day to an average of $1.810. Meanwhile, in East Texas, the Houston Ship Channel slipped 13.0 cents day/day to $2.300.
