Natural gas futures on Thursday soared amid rising demand and the release of the latest storage data outlining an injection that was a bullish miss against expectations and historical averages.
At A Glance:
- Storage up 70 Bcf
- Production dips
- Demand rises
The June Nymex gas futures contract backed off the $2.575/MMBtu intraday high and settled at $2.495, up 7.9 cents day/day.
Analysts with Gelber and Associates said the U.S. Energy Information Administration’s (EIA) natural gas storage report “was lower than many market participants expected, causing an impulse move higher upon the report’s release, tagging the front-month June contract’s yearly open of $2.56 before reverting back down.”
NGI’s Spot Gas National Avg. rose 2.0 cents to $1.780.
The dip in production to 95.7 Bcf/d in Wood Mackenzie’s Thursday estimate provided price support. Output remained well below the record highs earlier this year as producers are scaling back.
The “thing to look at right now” is LNG, Gelber analyst Ryan Parsons said.
LNG Demand Build
Since early this month, the market has been tracking an uptick in feed gas volumes to the Freeport liquefied natural gas export facility.
Freeport management recently confirmed that all three trains at the Texas facility are back online after a series of mechanical issues and damage from a winter storm earlier in the year. Production at the terminal is near its 15 million metric tons/year (mmty) design capacity helping ease global supply pressure and stoking domestic prices with added feed gas demand.
However, crews working at the facility since maintenance began in January have also been completing another project simultaneously. In March, Freeport CEO Michael Smith told NGI that a debottlenecking project had begun to push overall capacity to 16.5 mmty.
Feed gas flows to major U.S. LNG export facilities averaged 13.24 million dth/d Thursday, according to NGI’s North America LNG Export Flow Tracker data.
Looking ahead, Parsons said, “With the return of Cameron LNG from maintenance, exports will ramp up further to more than 14 Bcf.”
With supply falling and demand rising, the market latched onto the EIA storage report that reflected a tightening balance.
Tightening Balance
The EIA on Thursday reported an injection of 70 Bcf natural gas into storage for the week ended May 10. The result was a miss against expectations and historical averages.
Ahead of the report, estimates submitted to Reuters and Bloomberg each spanned 72 Bcf to 81 Bcf, with a median of 77 Bcf. NGI modeled a 75 Bcf injection for the review week.
The increase lifted inventories to 2,633 Bcf. However, stocks remain well above the year-earlier level of 2,212 Bcf and the five-year average of 2,013 Bcf.
Offering reasons for the latest build’s bullish miss, NatGasWeather meteorologist Rhett Milne said it was warmer than normal over the eastern half of the United States and cooler than normal over much of the West during the review week. Milne also pointed to wind and solar energy generation as “a little lighter” than in prior weeks.
National demand is forecast to end the current week also at lighter levels as the heat in Texas and the Southeast abates. Temperatures across Texas were slated to ease to the 70s to mid-80s as a weather system tracked into the region. Temperature highs in the upper 60s to lower 80s were expected across the rest of the country, except over portions of California and Florida, which were forecast to see temperatures in the 90s.
Looking to the EIA report for the week ending May 17, early estimates submitted to Reuters ranged from additions of 71 Bcf to 96 Bcf, with an average increase of 89 Bcf. That compares with an increase of 97 Bcf during the same week last year and a five-year average increase of 92 Bcf.
Cash Prices
Spot gas prices were mixed Thursday amid varied weather and pipeline maintenance changes.
Milder weather and the end of El Paso Natural Gas Co. (EPNG) and Natural Gas Pipeline Co. of America LLC (NGPL) maintenance earlier in the week pressured Waha cash prices, which slid 32.0 cents.
The Texas regional benchmark remained narrowly in positive territory at 18.0 cents after moving to the plus side just two days earlier.
EPNG maintenance that was restricting about 414,000 MMBtu/d westbound through FLOR B ended on May 12 and the NGPL maintenance ended on May 13, according to Wood Mackenzie analyst Kara Ozgen.
Ozgen noted Permian Highway Pipeline (PHP) maintenance was nearing completion. “PHP should return to full capacity tomorrow if everything goes to plan.” Gulf Coast Express (GCX) is “not too far behind,” Ozgen said. GCX is expected to have only 0.14 Bcf/d of pipeline capacity offline through Tuesday (May 21).
Capacity cuts as Algonquin Gas Transmission LLC ran a one-day cleaning tool between Cromwell and Burrillville compressor stations elevated prices at Algonquin Citygate 7.5 cents to $1.710.In the Rocky Mountains, against the backdrop of mild weather with temperature highs in the low 70s, the Rocky Mtns. Regional Avg. fell 9.0 cents to $1.455.
