Natural gas futures failed to sustain Monday’s momentum and finished lower Tuesday after weather forecasts took back some of the latest modeled demand boon for later this month. The December Nymex natural gas futures contract fell 9.1 cents day/day to settle at $3.092/MMBtu. January shed 8.4 cents to end at $3.303.
At A Glance:
- Prompt month falls 9.0 cents
- Texas production slows sharply
- Freeport flows back to normal
Weather forecasts Tuesday maintained light demand through this week but walked back some of the significant cold shift in modeling seen since Friday.
NGI’s Spot Gas National Avg. jumped 40.5 cents to $3.055, to regain the $3.000 threshold for the first time since late October. Prices rose fastest in West Texas amid a sharp drop in production, as well as in the downstream consuming areas in California and the Rockies.
Lower 48 production tumbled by around 2 Bcf/d on Tuesday amid multiple maintenance projects hindering flows in the Permian Basin and Haynesville Shale, according to estimates. Wood Mackenzie reported that output declined by about 1.8 Bcf/d to 104 Bcf/d on Tuesday. Bloomberg similarly estimated a drop of around 2.3 Bcf/d to 102.9 Bcf/d.
“Declines are largely concentrated in Texas with some maintenance underway but revisions are expected” in Wednesday’s estimates, Wood Mackenzie analyst Laura Munder said.
Work projects kicking off Tuesday in Texas were expected to crimp pipeline flows by about 1 Bcf/d, with the bulk from the Gulf Coast Express (GCX) pipeline, which runs south from the Permian to the Texas coast hubs. Another 1 Bcf/d of cuts to eastbound capacity in Louisiana was expected starting Tuesday from work on two other pipelines.
Offsetting supply’s bullish support was weather. The European model trended warmer with less cold over the northern United States, shaving off eight heating-degree days of demand, but still cold enough to keep gas demand at relatively strong levels for Nov. 21-28, according to NatGasWeather. The American model, meanwhile, showed a colder outlook for this weekend into early next week and a warmer shift for Nov. 23-26, the firm said.
Further out to Nov. 29-Dec. 3, temperatures were trending higher to near normal levels, “although the risk is this period trends colder a little colder in time, just as the Nov. 19-27 period did,” the firm said.
Elsewhere on the bullish side, exports from the Freeport LNG facility on the upper Texas coast appear to be returning to normal after an unplanned disruption last week. Freeport exports liquefied natural gas exports on Tuesday were estimated to be around 1.8 Bcf/d, or 70% capacity, according to NGI’s LNG Export Tracker. On Monday, flows had fallen to 7% capacity on Freeport’s main supply pipeline.
As a result, total U.S. LNG exports Tuesday soared about 1.6 Bcf/d day/day to around 14.5 Bcf/d, NGI data showed.
Texas Output Tumbles
With Freeport’s demand hiccup in the rear-view mirror, the market is focusing on the expected sharp drop in Texas gas supply from maintenance projects in the next week.
Of Bloomberg’s estimated 2.3 Bcf/d output drop Tuesday, Texas accounted for around 1.5 Bcf/d. Bloomberg further broke out Haynesville as down by 735,302 Mcf/d and the Permian down by 453,403 Mcf/d from Monday.
GCX projects were constraining Permian flows, though there are potentially more ways to divert around the bottlenecks. An expanded Whistler Pipeline, which also moves gas to the Texas coast is one. Soon, an expanded Permian Highway Pipeline LLC (PHP) could also take flows, according to EBW Analytics Group analyst Eli Rubin.
A project to add 0.55 Bcf/d capacity to the PHP is expected to come online in December, Rubin said. Pipeline data indicated PHP may be commissioning flows ahead of schedule, he said. The pipeline is a major supply route for Permian gas to the Southwest and Southern California, but the basin’s surging production is straining connections to consuming areas.
“If Permian egress capacity is already reaching maximum limits, however — a big ‘if’ given insufficient data — it could indicate difficulties in moving national upstream production higher over the next 30-45 days,” Rubin said.
Elsewhere in Texas on Tuesday, declines in the southern part of the state were concentrated on the NGPL (aka the Natural Gas Pipeline Co. of America) pipeline at intrastate interconnects near Corpus Christi and Houston, even though there was no planned work or notices, Wood Mackenzie’s Munder said.
Eastbound out of Haynesville, tool runs were expected to cut around 0.6 Bcf/d of capacity along a section of the Midcontinent Express Pipeline in northern Louisiana from Tuesday to Friday (Nov. 14-17), around one-half its recent flows, according to Wood Mackenzie. The 500-mile pipeline runs from southeastern Oklahoma across northeastern Texas, Louisiana and then on through Mississippi to Alabama.
Within the same eastbound corridor, maintenance work on the Gulf Run Pipeline near Jackson Parish, LA, could reduce flows by around 0.34 Bcf/d from recent levels also from Tuesday to Thursday (Nov. 14-16), Wood Mackenzie estimated.
Spot Market Prices
Next-day cash prices rose in all regions except the Northeast and Appalachia. The focal point for markets was the Permian, where production tumbled, resulting in huge price spikes in hubs in Texas and California.
The SoCal Border Avg. cash price jumped $1.820 day/day to average $5.280, to lead all hub gains. Close behind it was El Paso Permian, gaining $1.640 to $2.145, and SoCal Citygate, up $1.580 to $7.220.
Maintenance projects can result in supply gluts, leading to negative traded cash prices as was seen at Waha and other West Texas pricing hubs Monday. On Tuesday, however, the drop in supply was so sharp that it trumped maintenance bottlenecks.
Waha, which traded in a range from negative 80 cents to $2.000 Monday, traded between $1.750 to $2.500 to average $2.140 Tuesday.
Elsewhere, Chicago Citygate in the Midwest rose 23.5 cents to $2.660, while the benchmark Henry Hub in Louisiana rose 15.0 cents to $2.755, to more than erase its 4.0 cent drop on Monday.
Demand remained seasonably light across most of the United States with temperatures warmer than normal on Tuesday. That trend is expected to continue until the weekend, when a cold front is forecast to sweep across the Midwest and Northeast, NatGasWeather said. With lows in the 20s to 30s, the Northeast and Great Lakes areas could see heating demand return closer to seasonal levels, the firm said.
Meanwhile, most of the rest of the country could continue to see nice weather before the forecasted cooldown arrives next week, according to NatGasWeather.
