Weekly natural gas cash prices advanced as frigid temperatures, cold rains and bouts of snow settled in across the Rockies and neighboring regions, driving early-season heating demand.
An early-week cold shot in the Northwest and Mountain West launched a first round of solid demand, and this was immediately followed by another, stronger wintry system that descended from Canada midweek and stalled over the Rockies and Northern Plains through the trading week. It ushered in sub-freezing low temperatures and galvanized robust calls for natural gas to power furnaces across much of the North.
That system was expected to push over more of the Midwest as well as the Great Lakes over the weekend before heading to the Northeast to launch the trading week ahead, according to National Weather Service data.
NGI’s Weekly Spot Gas National Avg. for the Oct. 23-27 period jumped 20.0 cents to $2.390.
Leading gainers peppered the Rockies, including Kingsgate, up $2.725 to $4.470, and KRGT Rec Pool, up $1.850 to $3.900. In the Northwest, Malin soared $3.020 to $4.965.
The November Nymex contract also rallied through most of the week, with bullish sentiment sparked by the cold as well as improved LNG demand. It settled at $3.164/MMBtu on Friday, down 5.0 cents on the day but up 9% from the prior week’s finish. It rolled off the books as the prompt month on Friday after posting four gains during the week.
After maintenance-induced interruptions at liquefied natural gas facilities dragged LNG feed gas demand down to around 10 Bcf/d in the early fall, the export sector rebounded by mid-October. Following the return to full service of the LNG plant at Cove Point in Maryland and the culmination of other maintenance events, export demand has held near the 14 Bcf/d level.
Strengthening LNG demand – and the potential for an ongoing war in the Middle East to add calls for U.S. exports – could sop up excess production, Steve Blair, a veteran natural gas broker and independent analyst, told NGI. European buyers are worried that the Israel-Hamas conflict that erupted in early October could escalate and result in closed gas platforms in the region. This, Blair said, creates the potential for U.S. supplies to fill any void.
“That could eat up supply and provide more price support,” Blair said.
Futures Forge Ahead
Futures got their biggest bump of the week on Thursday – the November contract rose more than 20 cents -- when a surprisingly light storage increase boosted bullish sentiment and convinced more traders that strengthening demand had begun to offset strong production. Output reached a record level of about 104 Bcf/d early in the past week, according to Wood Mackenzie estimates.
The U.S. Energy Information Administration’s (EIA) latest inventory print, an injection of 74 Bcf for the week ended Oct. 20, came in below both expectations and historical averages. Prior to the EIA report, injection estimates coalesced around 79 Bcf. The five-year average increase was 66 Bcf, while the year-earlier build was 61 Bcf.
“It was clearly a low number, and it clearly helped the rally,” StoneX Financial Inc.’s Thomas Saal, senior vice president of energy, told NGI.
The South Central injection of 30 Bcf led all regions. The Midwest followed with a 25 Bcf injection. EIA reported an increase of 12 Bcf for the East, while Mountain region stocks increased by 4 Bcf, and Pacific inventories rose by 3 Bcf.
Still, the increase for the latest EIA report period lifted inventories to 3,700 Bcf, keeping stocks above the year-earlier level of 3,387 Bcf and the five-year average of 3,517 Bcf.
Strong production has enabled utilities to stockpile stout levels of gas. Should output remain elevated and mild fall weather return to the North, it could pave a path for more hefty injections in November. That could spur fresh bearish sentiment, Saal cautioned.
Looking ahead to the next EIA report, early injection estimates submitted to Reuters for the week ended Oct. 27 averaged 81 Bcf. That compares with an injection of 99 Bcf a year earlier and a five-year average of 57 Bcf.
Yet, for any worry about robust supplies outstripping demand this winter, analysts note that producers remain active ahead of an expected surge in LNG demand. New export facilities and expansions of existing ones are projected to come online starting next year, fueling calls for more of the super-chilled fuel to meet long-term global demand. This, said RBN Energy LLC analyst Sheetal Nasta, may necessitate strong storage levels.
Increasingly hot summers – and harsher winter conditions such as those that hit Texas two seasons ago and California last year -- do as well, she said
“Underpinning all this is the imperative to safeguard against the negative impacts of severe gas supply disruptions and intermittent demand fluctuations, particularly in markets like California and Texas, where consumers have felt the disastrous effects of temporary gas and power shortages (along with record-high prices) in recent years,” Nasta said.
Friday Cash Prices
Spot gas prices on Friday for weekend through Monday delivery rallied as they did every other session of the week. NGI’s Spot Gas National Avg. bounced 43.5 cents higher on the day to $2.895
The northern cold hovered over the Mountain West but also expanded to the Midwest and fueled the bullish momentum.
Opal in the Rockies spiked $1.095 day/day to average $5.435, while Northwest Wyoming Pool gained 96.0 cents to $5.490.
Northwest Sumas jumped 34.5 cents to $6.225.
The Midwest regional average, meanwhile, surged more than 50 cents, with Chicago Citygate up 55.5 cents to $2.915.
Looking ahead, NatGasWeather forecasts on Friday showed the Nov 4-10 period “still isn’t cold enough to be considered bullish.” The firm said national heating-degree days were expected to dip below normal during that period. However, it said the outlook shifted cooler from prior forecasts, and there was the potential for frigid northern conditions to linger longer than expected.
The system that impacted the Midwest also could push further to the south, delivering freezing lows to parts of Texas. It also was headed east and projected to canvas the Great Lakes and eventually the Northeast, NatGasWeather said.
On Friday in New England, PNGTS advanced 66.5 cents to $3.010.
AccuWeather meteorologists said Friday that the winter blast had already delivered heavy snow in some areas and drenching, cold rain in others, with a “zone of wintry precipitation” stretching from the interior Northwest through the Rockies and Northern Plains. This was expected to move across the Midwest over the weekend.
"As the pattern evolves, many areas over the Plains and Midwest will experience the coldest air of the season so far," AccuWeather meteorologist Dave Dombek said.
