Natural gas futures rose on Monday for a fifth session as the possibility of a rare summer storage draw later this week highlighted lower output alongside decent demand tightening supply-demand balances.
At A Glance:
- NGI models 1 Bcf injection
- Nymex gains for fifth day
- Henry Hub cash jumps above $2
The September Nymex contract settled at $2.189/MMBtu, up 4.6 cents on the day. The gain came as trading through the day trimmed earlier highs above $2.250.
NGI’s Spot Gas National Avg., meanwhile, climbed 24.5 cents to $1.660 on broad gains across North America amid tighter supply and moderate demand. NGI’s Henry Hub spot cash price jumped above $2 to reach its highest level in three weeks.
Wood Mackenzie estimated Lower 48 production averaged 101.3 Bcf/d over the weekend and fell to 100.9 Bcf/d on Monday. Ramped-up pipeline maintenance has reduced gas flows over the past week, with more projects planned this week. Additionally, Marcellus Shale shut-ins have played a role in slowing down production around 2 Bcf/d from a five-month high in late July.
“Our channel checks with several private and public producers indicated some upstream operators cleared the cupboard of near-term inventory which spiked supply above sustainable levels,” Tudor, Pickering, Holt & Co. (TPH) analyst Matt Portillo said.
That flush production in particular sent pricing low enough for Appalachia hubs Transco-Leidy Line and Texas Eastern M-2, 30 Receipt “where producers are unwilling to sell gas in-basin and we believe curtailments now are approaching about 1.4Bcf/d,” Portillo said.
On the demand front, weather models maintained outlooks for moderate demand to rise to above normal levels in the second half of the week, according to NatGasWeather. The southern half of the country “will be very warm to hot with highs of 90s and 100s” for strong regional demand in the Southwest and Texas.
The heat was expected to spread across interior states into early next week, with highs in the upper 80s to 100s “for stronger national demand,” the forecaster said. For the remainder of August, the American model was running hotter than the European model and this difference “will need watching” to see which model wins out, it said.
NGI’s U.S. LNG Export Flow Tracker data showed liquefied natural gas export terminals were scheduled to receive around 12.7 Bcf/d MMcf/d of feed gas on Monday. August flows to date have averaged about 12.9 Bcf/d, up from a July average of 11.9 Bcf/d that was slowed by the Freeport LNG terminal outage.
East Daley Analytics said last week it expects another 4 Bcf/d of incremental LNG capacity to come online by October 2025. Among the projects furthest along, Venture Global LNG Inc.’s Plaquemines LNG terminal has been receiving small amounts of feed gas ahead of commissioning work.
“We still expect Plaquemines to begin exports by the end of the month,” Portillo said.
Meanwhile, Cheniere Energy Inc. said its Corpus Christi LNG expansion project could begin taking gas in the next two months.
Midsummer Draw?
The U.S. Energy Information Administration (EIA) reported a relatively light 21 Bcf injection storage print for the week ended Aug. 2. That bullish report could be topped by the next EIA print the week ended Aug. 9 with estimates running on either side of flat.
Early estimates submitted to Reuters ranged from a withdrawal of 8 Bcf to an injection of 30 Bcf, with an average increase of 19 Bcf. NGI modeled a 1 Bcf injection. That compares with a year-ago addition of 33 Bcf and five-year average increase of 43 Bcf.
“Thursday's EIA storage report may disclose a rare midsummer draw — fostering upside momentum,” according to EBW Analytics Group’s Eli Rubin, senior analyst. He noted that “an oversupplied North American market is attempting to rapidly pare surpluses.” Short-covering and bullish technicals were also factors, he said.
Cash Prices Jump
Physical spot markets gained across all regions on Monday, supported by tighter supply and forecasts for rising demand this week.
The topsy-turvy West Texas market saw huge gains but held well short of positive territory. El Paso Permian surged $3.495 day/day to average at negative 96.5 cents.
To the east in Louisiana, the benchmark Henry Hub added 19.0 cents to $2.145 ahead of pipeline work in South Louisiana.
Natural Gas Pipeline Co. of America was scheduled to cut flows by 468 MMcf/d to the Sabine Pass LNG terminal Tuesday to Thursday, Wood Mackenzie analyst Nadeem Ahmed said. Sabine could offset that loss with supply from two other pipelines.
In the Northwest, prices were modestly higher ahead of maintenance with Northwest Sumas up 2.5 cents to $1.435.
Pacific Gas & Electric’s California Gas Transmission was scheduled to begin maintenance Wednesday on the Redwood path running through next Wednesday (Aug. 21). The work was expected to cut southbound flows into California by around 0.33 Bcf/d, or 19%, to 1.39 Bcf/d, NGI senior energy analyst Josten Mavez said.
Mavez noted that northern California prices moved lower during a similar drop in supply over Memorial Day weekend. “During that event, the PG&E Citygate spot price saw a drop from $2.020/MMBtu to $1.635 during the holiday weekend and averaged $1.873 for the remainder of the month as flows returned,” he said.
On Monday, PG&E Citygate shed 2.5 cents to $2.785.
In the East, the Mountain Valley Pipeline LLC (MVP) was expected to return to full strength after pigging work was completed on Wednesday, Criterion Research Inc.’s James Bevan, vice president of research, said on energy platform Enelyst.
During the outage, a similar drop was seen in production levels on Equitrans Midstream Corp., Bevan said. “We expect to see Equitrans lift higher later this week. If that does not happen, it could point to some level of curtailments.”
The Appalachia Regional Avg. rose 6.0 cents to $1.455, while the Southeast Regional Avg. rose 9.5 cents to $2.235.
Meanwhile, a tropical storm was expected to form in the Atlantic near the Virgin Islands and Puerto Rico, but was tracking to swing back out to sea and miss the Lower 48, according to the National Hurricane Center.
