Weekly natural gas cash prices were mixed, as a preview of summer weather sent demand higher in portions of the country, and pipeline maintenance underway or ending provided varied directional support.
NGI’s Weekly Spot Gas National Avg. for the May 13-17 period rose 24.0 cents week/week to $1.665/MMBtu.
Futures, meanwhile, spent the bulk of the week swinging higher. The June Nymex contract settled at $2.626 to close the trading period on Friday, up 13.1 cents on the day and 37.4 cents above the prior week’s finish.
Weather was the story of the physical market during the review week, as temperatures in Texas and the Southeast climbed into the 80s to mid-90s, increasing cooling demand. However, a severe storm hit Houston and the surrounding areas on Thursday evening (May 16). Significant building damage, traffic lights down and power lost to about 1 million utility customers scuttled demand.
Wood Mackenzie analysts Nadeem Ahmed and Laura Munder said early Friday that the storms appeared to have impacted around 50,000 MMBtu of supply flowing to nearby power plants. Flows of feed gas to LNG terminals were not affected.
No pipelines noted operational issues. Instead, a spattering of pipeline projects improved the flow of associated gas out of the Permian during the week, easing the supply glut and limiting the impact of the overall higher demand.
Waha turned positive Wednesday (May 15) and managed to hold there the following day. But Friday, the Texas regional benchmark average fell back into the negative, where it had mostly languished since March. As the trading week came to a close, Waha was up $2.945 to negative 5.0 cents. Meanwhile, Transco Zone 5 in the Southeast at $2.780 was up 26 cents week/week, on the regional warming.
In futures trade, a near weeklong rally extended into the final trading session Friday as the market latched on to the latest storage data, reflecting changing trends in supply and demand.
“Reasons for gains are the same as they’ve been for the past two weeks,” NatGasWeather said Friday. Bullish misses to the U.S. Energy Information Administration (EIA) weekly storage report, the Freeport liquefied natural gas export terminal showing stronger flows, bouts of early season heat over Texas and the expectation that a hot summer with a tight balance would steadily decrease surpluses over time, the firm said.Surplus Erodes
The futures contract’s sizable move upward Friday followed Thursday’s EIA storage report, which outlined a 70 Bcf injection for the week ended May 10.
The result was a miss against expectations and historical averages. The injection increased inventories to 2,633 Bcf and trimmed the five-year average surplus to 620 Bcf.
However, stocks remain well above the year-earlier level of 2,212 Bcf and the five-year average of 2,013 Bcf.
Noting the injection was the second consecutive bullish surprise, EBW Analytics senior analyst Eli Rubin said a stretch of two back-to-back bullish EIA reports does not alone make a trend.
But, “the bullish figures — aided by the early return of Freeport LNG and an early-May heatwave — have pulled accelerated the beginning of the long-term trend of substantial, repeated declines in the storage surplus,” Rubin said.
Looking ahead to the EIA report for the week ending May 17, early estimates submitted to Reuters ranged from additions of 71 Bcf to 96 Bcf, with an average increase of 89 Bcf. That compares with an increase of 97 Bcf during the same week last year and a five-year average increase of 92 Bcf.
Friday’s Cash Market
Spot gas prices were mostly lower for the typical Saturday-Monday package traded Friday as weekend demand erosion combined with weather-related losses.
The overnight storm in Texas knocked out power to more than 800,000 utility customers in parts of the state and Louisiana.
Wood Mackenzie analysts Nadeem Ahmed and Laura Munder said the storm appeared to impact around 50,000 MMBtu of supply flowing to nearby power plants.
After holding positive ground for two days, prices at Waha dipped back into the negative, shedding 33.5 cents to average negative 15.5 cents.
As the weather system that brought severe weather to Texas tracked across the Southeast, temperatures were forecast in the 70s to 80s.
Despite the resulting decline in cooling demand, pipeline maintenance impacting the region supported Southeast price gains. Transco Zone 5 was up 11.0 cents to $3.020, and Transco Zone 4 gained 9.0 cents in heavy volume trade to an average of $2.935.
