Bears kept natural gas futures on the back foot again on Wednesday, extending the prompt month’s losing streak to three sessions. Production estimates again touched a new all-time high while weather forecasts stayed mild, likely keeping gas in storage leaning toward injection this week.
At A Glance:
- Prompt month falls to $3.106
- Cash prices halt six-session slide
- Production tops 105 Bcf/d
The December Nymex natural gas futures contract fell 3.4 cents day/day to settle at $3.106/MMBtu. January shaved off 7.4 cents to settle at $3.389.
NGI’s Spot Gas National Avg. jumped 31.5 cents day/day to average $2.105 to snap a six-session losing streak. Broad gains were seen across regions, but notably, the benchmark Henry Hub price rebounded 17.5 cents to $2.210 Wednesday, a day after it flirted with falling below the $2 psychological level.
Even after the bounce, the Henry Hub cash price has been slashed by a third, or more than a dollar, in November amid mild weather, record production and a rising gas in storage surplus. The hub’s rapid descent may in part be due to storage facilities losing their ability to inject gas in storage after withdrawing during last week’s severe cold, EBW Analytics Group analyst Eli Rubin said.
“Many storage facilities flipped from injections to withdrawals — and cannot easily return to injections,” he said. This week’s unseasonably warm weather points to a likely injection, but with gas prices crumbling, “it appears that the physical ability to inject surplus gas is lacking.”
Meanwhile, he said futures may find support at the key technical level of $3.07 and traders with short positions may start to take profits, he said. Indeed futures traded only briefly below that level Wednesday, touching a low of $3.058, before moving higher late in the session.
Weather models showed no major changes Wednesday, with “light national demand through Thursday as comfortable highs of upper 50s to 80s rule most of the southern and eastern United States,” NatGasWeather said.
The return of that warm weather to the Gulf Coast, seeing highs in the 80s, is slowing liquefied natural gas export demand somewhat because it does not aid in the chilling of the gas. LNG feed gas demand fell below the 14 Bcf/d level for a fourth day after maintaining that level for five days, data from NGI’s LNG Export Tracker show.
Turning to supply fundamentals, Wood Mackenzie lifted its Monday production estimate to 105.1 Bcf/d, higher than the newly notched record on Saturday. Wednesday output was estimated at 103.9 Bcf/d, while Tuesday as expected was revised up 0.5 Bcf to 104.0 Bcf.
Storage Data Delayed
Markets this week face the unusual delay of the U.S. Energy Information Administration’s (EIA) Thursday storage report for the week ended Nov. 3 because the agency is conducting a systems upgrade Nov. 8-9. Instead of on Thursday, the EIA plans to release data on Nov. 16 for the weeks ended Nov. 3 and Nov. 10.
The EIA last week reported a net injection of 79 Bcf natural gas in storage for the week ended Oct. 27, near median builds in analyst surveys of 81-82 Bcf and NGI’s modeled 82 Bcf. The injection swelled the storage surplus to 205 Bcf, or 5.7%, above the five-year average at 3,779 Bcf.
With the EIA print delayed, the industry is relying more heavily on private daily estimates of production that are variable, StoneX Financial Inc.’s Thomas Saal, senior vice president of energy, told NGI. “The EIA numbers are supposed to be the real McCoy, so it is important, but I don’t think the world’s going to come to an end because they didn’t file a report this week.
“I know when the report comes out, there’s usually some trading activity … and sentiment might increase in one direction or another because of the report. But this time of year, you’re transitioning from injections to withdrawal, so I think it’s probably going to be minimal because it won’t be a big number.”
That is generally where the estimates have landed. For the EIA storage week ended Nov. 3, NGI modeled a 9 Bcf withdrawal. Meanwhile, survey estimates submitted to Reuters ranged from a withdrawal of 20 Bcf to an injection of 21 Bcf, giving a withdrawal of 7 Bcf as the median.
Cash Prices Halt Slide
Spot natural gas prices halted a six-session slide on Wednesday with broad gains across all regions.
Price hubs in Texas picked themselves off the mat from levels hit Tuesday. El Paso Permian in West Texas jumped $1.010 day/day to average $1.130, leading all gainers. Transwestern, which fell negative on Tuesday, climbed by 96.5 cents to flip back positive to a cash price of 92.0 cents, though it was still the lowest price in North America.
Near them in West Texas, a 5.3 magnitude earthquake that struck early Wednesday near Mentone was expected “to be unimpactful,” Wood Mackenzie analyst Laura Munder told NGI. “We are not seeing anything posted by the pipelines that would indicate damaged facilities/production impacts nor are we seeing big changes in the data.”
For reference, she said a 5.4 magnitude earthquake on Dec. 16, 2022 near Midland, TX did not affect production.
Westward, maintenance remained minor to ease supplies into demand regions like California. El Paso’s scheduled inspection on the Leupp 5A unit in its New Mexico region Wednesday and Thursday was only expected to reduce capacity by 50 MMcf/d.
Amid that calm, SoCal Citygate broke its streak of back-and-forth ups and downs, falling for a second day Wednesday. The hub led decliners, dropping 71.5 cents to $6.490. The move lower comes a day after buyers complained about prices above $8 amid a glut of gas in the local system and its $4 premium to the SoCal Border Avg. cash price.
That $4 premium was maintained Wednesday, even as SoCal Border Avg. rose 40.5 cents to $2.130.
A day after the Northeast and Appalachia bucked the downward trend with gains, these regions on Wednesday were dotted with declines. Algonquin Citygate shed 5.5 cents to average $1.945. Tenn Zone 4 200L fell 12.0 cents to $1.650.
A fast-moving wintry mix was expected to hit the Northeast Wednesday night into Thursday morning, bringing icy conditions and freezing temperatures, Accuweather senior meteorologist Alex Sosnowski said. The tail end of the system may stall and bring light rain and drizzle to areas as far south as Virginia, West Virginia and parts of Maryland, Delaware and southern New Jersey on Friday, he said.
The colder weather in the Northeast and shot of cooler air as far south as Texas will bump national demand to near seasonal levels over the weekend, with overnight lows into the teens to 30s over most of the northern and central states, NatGasWeather said.
