‘Tis the season for pipeline maintenance, with a host of planned events fueling gains for some natural gas markets, according to NGI’s Forward Look.
May forward prices averaged 5.0 cents higher from March 30-April 5, while the balance of summer (May-October) went unchanged from the prior period.
The winter strip (November-March) also barely moved at the vast majority of North American locations, Forward Look data showed, though the Algonquin Citygate was a glaring exception. Prices there for the winter shot up 51.0 cents to average $12.341/MMBtu as traders priced in the possibility of the pipeline-constrained region needing to compete with the global market for LNG during the peak season. On Thursday, both Dutch Title Transfer Facility and Japan Korea Marker prices for the upcoming 2023-2024 winter were seen slightly below $20.
With the spring shoulder season underway – and little weather-driven demand to meaningfully move markets – pipeline maintenance proved to be a significant influence.
In the Permian Basin, maintenance that began April 1 on Kinder Morgan Inc.’s Tejas Pipeline was limiting south to north capacity by around 49%. While the work initially curbed April forward prices as it removed capacity from an already tight market, May prices actually rebounded sharply, according to Forward Look.
Waha May forward prices jumped 21.0 cents from March 30-April 5. That said, fixed prices remain deeply discounted to the rest of the Lower 48, with May sitting at only 62.5 cents.
What’s more, the Gulf Coast Express (GCX) pipeline is scheduled to begin inspections and planned maintenance of compressors at Rankin, Devils River and Big Wells beginning April 11. This would reduce capacity on the pipeline to 1.2 Bcf/d on April 11 and 12 and to 1.6 Bcf/d on April 13 and 14.
Further out the Waha forward curve, price gains were mixed. The balance of summer climbed 14.0 cents to average 98.0 cents, and the winter 2023-2024 strip fell 4.0 cents but averaged a much stronger $2.520, Forward Look data showed.
Elsewhere across the country, unsettled weather drove up prices in the Pacific Northwest.
The National Weather Service said a cold front and surge of Pacific moisture pushing inland from northern California to Washington could produce a few inches of rainfall until weakening and sliding into the Intermountain West on Friday night. Warm air associated with the system was likely to result in very high snow levels to reach up to 5,000 feet and the potential for snowmelt across lower elevations.
The continuation of cold weather in the Pacific Northwest drove gains along the front of several regional forward curves given the locally dire storage situation.
Northwest Sumas May forward prices climbed 13.0 cents to reach $2.427, according to Forward Look, while the balance of summer slipped 7.0 cents to $3.160. Winter prices also came off 7.0 cents to average $7.740.
At Malin, May jumped 20.0 cents to $2.919, but the balance of summer slid 7.0 cents to $3.340. The winter strip lost 2.0 cents to reach $6.380. Similar price moves were seen at Stanfield.
On the storage front, the Energy Information Administration (EIA) on Thursday provided insight into whether the storage situation in the Pacific has improved at all in recent weeks. The agency said stocks as of March 31 – the official end of the withdrawal season – stood at 73 Bcf, which is unchanged week/week. However, inventories in the region remain sharply below both the year-earlier level of 164 Bcf and the 169 Bcf five-year average.
Notably, the Pacific is the only region in the United States where inventories trail historical levels.
The South Central, where liquefied natural gas export demand continues to post incremental gains amid Freeport LNG’s ongoing restart and the commissioning of Calcasieu Pass LNG, recorded inventories at 921 Bcf as of March 31. This is 56% above year-ago levels and nearly 39% above the five-year average, according to EIA.
East stocks were more than 22% above the five-year average at 335 Bcf, while the Midwest stood nearly 26% above that level at 421 Bcf.
Total working gas in storage closed out the withdrawal season at 1,830 Bcf, which is 443 Bcf above year-ago levels and 298 Bcf above the five-year average, EIA said.
The plump overhang in storage has been a huge weight on the market throughout much of the winter. Despite a larger-than-normal March monthly withdrawal for natural gas, the majority of bullish drivers were because of a moderately chilly and supportive weather backdrop.
Now that spring has sprung and long-range weather outlooks have trended milder, EBW Analytics Group said the dramatic bearish weather shift for the next three weeks and particularly weak demand could yield a resurgent storage surplus into mid-April. With April now forecast to match the lowest gas-heating degree day total of the past 15 years, the market could rapidly rebuild the national storage surplus towards 400 Bcf.
Regarding the Pacific, EBW said the end of winter may relax regional pipeline constraints to the western U.S. and enable a geographic rebalancing to emerge into the injection season. This may narrow both surpluses east of the Rockies and deficits in the Mountain and Pacific regions in the coming weeks.
“We continue to view the balance of Calendar 2023 market outlook as beset by near-term weakness at the front of the curve, but the longer-term storage trajectory does not appear as worrisome in the majority of likely scenarios,” EBW senior analyst Eli Rubin said. “Carrying forward the current storage surplus through the end of October would put end-of-October inventories near 3.9 Tcf in the most-likely scenario at current Nymex pricing, even after including near-term blowtorch warmth.”
