August Nymex natural gas futures deepened losses Thursday despite excessive heat across much of the country. The market appeared to defy the outlook for heavy gas demand in favor of robust supplies.
At A Glance:
- Heat takes backseat to supply
- EIA reports 65 Bcf injection
- Freeport LNG still offline
The prompt month contract was off 6.1 cents day/day to settle at $2.268/MMBtu. August futures traded as low as $2.261 and as high as $2.343.
NGI’s Spot Gas National Avg. fell 13.0 cents to $1.910 on the day, pressured by milder weather in portions of the country.
“Boom and prices go back in the cave,” said The Desk publisher John Sodergreen on the online energy platform Enelyst following the release of the U.S. Energy Information Administration’s (EIA) latest storage report.
The print covering the week ended July 5 showed 65 Bcf of natural gas injected into Lower 48 storage facilities. The injection was in-line with the high end of expectations. It exceeded the 57 Bcf build in both the prior year period and the five-year average increase.
Total working gas supplies were lifted to 3,199 Bcf, 283 Bcf more than last year and 504 Bcf above the five-year average.
The August contract “seems to continue to trade lower on the above-expected storage injection,” Snapper Creek Energy analyst Kyle Cooper told NGI. “That could easily be driving the market lower.”
He warned, however, that while last week’s injection was larger than expected, “the current week looks to be a very small injection as production remains subdued and nat gas generation is soaring.”
Analysts with Gelber & Associates called the market’s response to the storage build “muted,” having seen most of the downward move occurring before the report’s release. The analysts pointed to pressure from higher natural gas production, noting that early output estimates increased by “a marginal” 0.3 Bcf/d to 100.7 Bcf/d Thursday.
Wood Mackenzie production estimates showed output of 100.1 Bcf/d Thursday versus 100.4 Bcf/d the day before.
The Gelber analysts also were following the ongoing recovery in Texas after former Hurricane Beryl plowed through the region, knocking out power to residents and impacting oil and natural gas interests.
“We are continuing to monitor outages in Texas, last measured at 1.3 million,” Gelber said. About 1.1 million power outages were attributable to CenterPoint Energy Inc. customers that were still without power Thursday. CenterPoint is Houston’s largest utility provider.
As of late Wednesday, the Houston-based utility said it had restored power to more than 1.1 million customers impacted by the storm. It expected to have restored power to an additional 400,000 customers by Friday and 350,000 more by Sunday.
CenterPoint CEO Jason Wells said nearly 500,000 customers may not have power until next week. He outlined restoration efforts during a hearing Thursday at the Public Utility Commission of Texas.
Wells said the transmission system and substations were unharmed, and none of the substations flooded, as in previous storms.
Beryl “was a storm that largely caused debris on the distribution system,” Wells said. The debris included trees that snapped and fell on power lines. As of Thursday, CenterPoint had “completed the vast majority of the damage assessment.” The entire assessment was set to be completed by the end of the day.
“At this point, the number of outages is relevant to price less so because of power demand impacts but instead because of implications for LNG,” the Gelber analysts said.
Market concerns about liquefied natural gas focused on Freeport LNG Development LP, which remained shuttered on Thursday. The facility on the Texas coast had been shut before Beryl stormed ashore.
As CenterPoint “prioritizes repairs in the residential areas that it services, we may need to see broad outage numbers drop lower before the terminal gets power back,” Gelber analysts said.
In addition to the demand-side impact from Beryl, NatGasWeather said Thursday’s August futures selloff was potentially attributable to cooler weather trends.
The midday Global Forecast System data showed the United States on track to lose 8 cooling degree days (CDD), up from 5 CDDs in the overnight forecast.
NatGasWeather said the decline in CDDs was unsurprising as both the American and European weather models “have been over-forecasting heat this summer, just as they did all last summer.”
“But even after steadily losing CDDs over time, this June and July are still playing out as one of the hottest on record,” the firm said. Despite the heat, natural gas surpluses have not been declining “at a fast enough pace, evidenced by it taking until early August before surpluses drop to 400 Bcf,” NatGasWeather said.
“We view this as a big reason why natural gas prices have steadily sold off the past three weeks,” NatGasWeather said.
The National Weather Service (NWS) said Thursday “extremely dangerous heat,” with widespread heat warnings and advisories, would continue in the western United States for the rest of the week. Hazardous heat conditions were forecast to expand over portions of the central and eastern portions of the country into next week and persist longer over portions of the Southeast and the East Coast, NWS noted.
Natural gas inventories for the week ending July 12 were expected to be impacted by the resulting heat-related demand, as well as the lower consumption attributed to the loss of generation from Beryl.
Early estimates from Reuters for natural gas inventories for the week ending July 12 ranged from additions of 18 Bcf to 55 Bcf, with an average increase of 38 Bcf. That compares with an increase of 43 Bcf during the same week last year and a five-year average increase of 49 Bcf.
Spot Gas Sinks
Prices for natural gas deliveries Friday were lower at hubs across the country despite the heatwave still plaguing portions of the country.
NWS said triple-digit heat was expected on Friday across large swaths of California, the Southwest and the Rockies. Meanwhile, the forecaster said Beryl’s remnants were expected to bring rain to the Mid-Atlantic through Friday, keeping the region’s highs mostly in the 80s.
Shrugging off the heat, California hub prices tripped lower. SoCal Citygate fell 43.5 cents day/day to $2.595, Malin was off 37.5 cents to $1.830, and PG&E Citygate was 26.0 cents down to $3.135.
Cooler weather sent prices at Dawn in the Midwest down 6.0 cents to $1.730, Texas Eastern M3, Delivery in Appalachia 13.5 cents lower to $1.625, and Transco Zone 6 non-NY down 20.0 cents to $1.560.
