Weekly natural gas cash prices lost ground despite brief bouts of wintry weather and stronger heating demand in parts of the central and eastern United States. This was offset by mild temperatures elsewhere and robust production that ultimately hampered both physical markets and futures.
NGI’s Weekly Spot Gas National Avg. for the Feb. 12-16 period shed 18.0 cents to $1.785.
As the trading week closed, El Paso Permian in West Texas was down 13.5 cents to 93.5 cents, while Consumers Energy in the Midwest was off 18.0 cents to $1.605, and El Paso San Juan in the Rockies was down 37.0 cents to $1.640.
The March Nymex natural gas contract slumped throughout most of the week, as forecasts pointed to milder weather ahead and supplies remained abundant. Production held around 105 Bcf/d during the past week, according to Wood Mackenzie, within striking distance of record levels just above 107 Bcf/d.
The prompt month settled at $1.609/MMBtu to close the trading week on Friday, up 2.8 cents on the day but down 13% from the prior week’s finish. Friday marked the only advance of the week and the first in nine sessions.
“There really doesn’t seem to be any catalyst for this market,” absent cuts to production or a sudden shift in weather, Paragon Global Markets LLC’s Steve Blair, managing director of institutional energy sales, told NGI.
A fierce Nor’easter blew into heavily populated areas of the East around midweek, bringing chilly air and galvanizing a fresh round of demand. Snow blanketed parts of the nation’s midsection, too.
“Just days after near-record warmth in some areas, a storm that brought accumulating snow to the southern Plains and parts of the Mississippi Valley on Monday” rode “a sudden change in the weather pattern, bringing accumulating snow and triggering travel disruptions from the upper part of the mid-Atlantic to southern New England,” said Alex Sosnowski, AccuWeather senior meteorologist.
But such weather quickly faded, replaced by seasonally benign air and comfortable temperatures that kept bearish pressure on prices. Another brush of northern cold was in the cards for the President’s Day weekend. But in all, conditions during the week were mild over much of the Lower 48.
“Weak fundamentals have prevailed, with above-normal winter weather taking center stage to limit demand in an oversupplied market,” analyst Jack Weixel of East Daley Analytics said.
“Natural gas prices have fallen below the $2/MMBtu mark through the spring of 2024 as balmy temperatures and steady production growth create shoulder-month trading conditions,” Weixel added.
Futures Flop
Futures struggled in the week – as they have most of the winter – in large part because of the strong production that, coupled with benign weather much of the season, resulted in stout supplies in storage.
The U.S. Energy Information Administration (EIA) on Thursday printed a storage withdrawal of 49 Bcf for the week ended Feb. 9. It fell short of expectations for a pull in the high 60s Bcf, according to both polls and NGI’s estimate.
It also was well below the 149 Bcf five-year average pull. EIA recorded a year-earlier draw of 117 Bcf.
“Given the miss and its confluence with an already-bearish sentiment in the market,” the EIA print on Thursday extended prompt month losses, Gelber & Associates analysts said.
Thanks to comfortable weather conditions and stronger wind generation, the South Central posted an injection of 20 Bcf. This partially offset the East and Midwest regions’ draws of 32 Bcf and 27 Bcf, respectively, according to EIA. Pacific region stocks decreased by 6 Bcf, while Mountain inventories fell by 5 Bcf.
The overall decrease for the latest EIA report period lowered inventories to 2,535 Bcf, but stocks remained well in excess of the year-earlier level of 2,280 Bcf and the five-year average of 2,187 Bcf.
“Given the weak fundamentals, we believe there is risk to inventories finishing [winter] above 1,900 Bcf and further suppressing prices through the 2024 shoulder season,” Weixel said.
Looking ahead to next week, analysts are generally expecting another modest pull. Preliminary estimates for the week ended Feb. 16 submitted to Reuters ranged from withdrawals of 62 Bcf to 98 Bcf. The five-year average draw is 168 Bcf.
Friday Cash Prices
Natural gas cash prices cascaded across much of the country in trading on Friday, which was for deliveries from Saturday through Tuesday, thanks to the holiday weekend. NGI’s Spot Gas National Avg. shed a half-cent to $1.595.
But hubs in Appalachia and the Northeast provided counters to the overall trend.
Algonquin Citygate near Boston rallied 59.0 cents day/day to average $2.915, while Transco Zone 6 NY gained 29.5 cents to $1.675.
Weather data showed freezing temperatures permeating the northern portions of the Plains and Midwest as well as the Northeast Friday and into the weekend.
But the chill was not expected to endure.
Maxar’s Weather Desk said Friday models showed predominantly warmer temperatures for much of the Lower 48 through both the six- to 10-day and 11- to 15-day projection periods.
For next week through Feb. 25, the forecaster called for “anomalously warm” temperatures that would include highs in the 50s for Chicago and the upper 70s to low 80s for Texas. The eastern half of the Lower 48 could then experience some “brief” cooling before a “strengthening flow from the Pacific quickly returns aboves and much aboves to the Plains and Midwest at the end of the period.”
In its Feb. 26-March 1 outlook, Maxar projected an “amplified pattern, as a trough settles southward along the West Coast.” This could usher in cooler and wetter conditions along the West Coast, according to the forecaster. But the eastern two-thirds of the Lower 48 could see warmer than normal temperatures.
Against that setup, spot prices descended in most regions on Friday. Chicago Citygate lost 4.5 cents to $1.460, and in the West, Northwest Sumas fell 19.0 cents to $1.755.
On the pipeline front, Wood Mackenzie analyst Kevin Ong noted that El Paso Natural Gas declared a force majeure on its Line 1903 due to equipment failure. This curtailed supplies flowing via the Mojave Pipeline Company, which delivers gas via Arizona to California.
Prices across the Southwest and Southern California declined, however, amid waning demand. SoCal Citygate, for one, dropped 40.0 cents to $2.065.
