Natural gas futures pushed higher Monday, supported by the return of hot weather this week, a 12-week high in U.S. LNG exports and crimped supply in key South Central markets.
The July Nymex contract settled up 16.9 cents day/day at $2.756/MMBtu. The contract took a windy road to get there. Prices jumped to a day high of $2.799 in the morning, sank quickly by around 17 cents before midday, then bounced higher in the afternoon.
Aiding sentiment for futures, NGI’s Spot Gas National Avg. leapt 47.5 cents to $1.695. The benchmark Henry Hub gained 86.5 cents to $2.635, its biggest daily gain of the year, excluding the weekend of the January freeze-offs.
Henry Hub cash prices saw support from unexpected cuts to pipeline flows and a slowdown in gas production.
Haynesville Shale production shed another 0.5 Bcf/d over the weekend, “furthering perceptions of lower gas supply,” which helped support gas futures Monday, EBW Analytics Group analyst Eli Rubin said. Haynesville output on Sunday stood at around 9.4 Bcf/d, Bloomberg data showed. The lower weekend production readings were “allaying bearish fears” in the market that had been caused by increases in output levels last week, he said.
On Monday, Wood Mackenzie estimated Lower 48 gas production was down day/day at 98.7 Bcf/d, extending a slight slowdown in output over the weekend that had paced around 99.5 Bcf/d. Production levels had inched closer to the 100 Bcf/d level alongside a rally in prices after reaching a low of around 97 Bcf/d in early May, analyst Eric McGuire said.
Bulls got the better of bears for much of May, with a short squeeze that enlisted bears buying back some of their positions to help send futures higher. However, bears took control at the end of last week, aided by higher production raising the threat of higher supply.
“We expect wild daily moves of 10 to 20 cents in the weeks ahead,” NatGasWeather said. “Bulls were in control the first several weeks of May, then bears plunged prices last week.”
Weather models only showed minor changes over the weekend. NatGasWeather said the next several days were expected to produce “decently strong” weather-driven demand nationally. The firm expects temperatures to be “warm to near or above normal over most of the U.S., including highs of mid-80s over much of the Midwest/Great Lakes, Ohio Valley and East.”
The week was also expected to see “impressive heat returning to Texas with highs of mid-90s and 100s,” the forecaster said.
Outage Monitoring
Unexpected pipeline outages have pinched southbound flows along TC Energy Corp.’s ANR Pipeline Co. in Tennessee and Louisiana.
ANR declared a force majeure for southbound flows through its Eunice compressor station (CS) in Acadia Parish, LA. Flows are set to be reduced to 363,000 MMBtu/d through June 11 “due to an unexpected and uncontrollable equipment failure” at Mermentau CS, the pipeline operator said. Flows south through the Eunice CS fell to 336,789 MMBtu Monday from 417,098 MMBtu Sunday, Wood Mackenzie analyst Alex Sealy said.
A similar equipment failure cut southbound flows through the Cottage Grove CS on the Southeast mainline in Tennessee, ANR said in a Friday (May 31) notice. Flows through the CS fell by 353,452 MMBtu day/day to 884,310 MMBtu on Friday, Sealy said. Flows are to continue to be reduced by 204,486 MMBtu/d through Sunday (June 9), ANR said in a notice.
Elsewhere, Transcontinental Gas Pipe Line Co. (Transco) said it would start maintenance Tuesday on CS 44. This work could cut deliveries to Cheniere Energy Inc.’s Sabine Pass LNG export terminal in Louisiana by up to 404,000 MMBtu/d based on a previous outage, Wood Mackenzie analyst Kevin Ong said.
U.S. liquefied natural gas feed gas volumes touched a 12-week high at about 13.54 Bcf/d on Sunday. The daily total was the highest since March 11, according to NGI’s North American LNG Export Flow Tracker. However, U.S. LNG exports were expected to slow as terminal maintenance picked up in June.
The Sabine Pass LNG terminal in Louisiana was scheduled to kick off maintenance Monday. The work was expected to last until June 16. Work was also planned at Cheniere’s Corpus Christi LNG terminal in South Texas from Aug. 6-8 and from Sept. 10-21.
LNG feed gas flows were stable near 13 Bcf on Monday. Volumes nominated to Freeport LNG in Texas returned to nearly 80% of pipeline capacity after a brief outage from a trip of Train 2 Thursday that halted production for about 16 hours.
Storage Views
The U.S. Energy Information Administration (EIA) on Thursday reported a bigger-than-expected 84 Bcf injection for the week ended May 24. That print was spot on with NGI’s estimate but lagged the historical average and year-ago build.
Looking ahead to Thursday’s EIA assessment, estimates for the week ended May 31 point to a heftier increase, thanks to stronger gas production.
Early estimates submitted to Reuters ranged from injections of 73 Bcf to 95 Bcf, with an average increase of 86 Bcf. These estimates compare with a five-year average build of 103 Bcf and year-ago gain of 105 Bcf. NGI modeled a build of 97 Bcf.
One factor in Thursday’s print would be Lower 48 production ticking up to around 100 Bcf/d, including in the Northeast where output has risen by around 700 MMcf/d over the past two weeks, Tudor, Pickering, Holt & Co. (TPH) analyst Justin Martin said.
One bullish factor is recent cooling degree day (CDD) totals performing strongly versus historical norms, Martin said. “We are exiting the shoulder season and seeing power generation demand begin to tick up, with May CDDs outpacing the 10-year average.”
Spot Prices Jump
Physical cash prices soared Monday, supported by the return of summer heat this week across much of the country, especially in the West, and reduced supply in key Gulf Coast markets.
The biggest gains were seen in South Louisiana and East Texas — both boosted by lower Haynesville output — and the Southeast.
In East Texas, Gulf South Pool 16 rose by 58.5 cents day/day to average $2.015. In South Louisiana, all but one hub increased by 50 cents. Tennessee Line 500 jumped 84.0 cents to $3.355.
In the Southeast, Transco Zone 4 rose $1.000 day/day to average $3.635. Florida Gas Zone 3 added 89.0 cents to $3.640.
Declines were mostly limited to Canada. Westcoast Station 2 fell 25.0 cents to 2.0 cents and traded as low as negative 10.0 cents. However, the country’s two largest volume hubs posted gains on the day.
The Rocky Mtns. Regional Avg. rose 40.0 cents to $1.240.
Severe heat was expected to plague western states this week, including California without its usual onshore winds to cool it down.
“The first widespread heat wave for the western United States is building and will last through the end of the week,” AccuWeather meteorologist Alex Sosnowski said.
The forecaster said Fresno, CA, may see temperatures around 105 degrees from Wednesday to Friday, within a few degrees of a record set in 1903. Las Vegas temperatures could hit 108 degrees on Wednesday and 111 degrees on Thursday, Sosnowski said. Phoenix could reach 110 degrees Wednesday to Friday.
The forecaster said Fresno, CA, may see temperatures around 105 degrees from Wednesday to Friday, within a few degrees of a record set in 1903. Las Vegas temperatures could hit 108 degrees on Wednesday and 111 degrees on Thursday, Sosnowski said. Phoenix could reach 110 degrees Wednesday to Friday.
