October 5, 2022

Natural gas futures, spot prices rally as production falls

After holding steady for several days, production fell on Tuesday and led to a rapid rebound in natural gas futures. September Nymex gas futures settled 24.4 cents higher day/day at $7.833/MMBtu. October futures rose 24.7 cents to $7.825.

In short :

  • Permian and Appalachian outlet shafts
  • Storage seen benefiting from cooler temperatures
  • Spot gas is generally higher, but the northeast falls

Spot prices also recouped some of the previous days’ losses despite thunderstorms lowering temperatures across large swaths of the country. NGI’s Spot Gas National Avg. picked up 5.5 cents to $7,900.

As natural gas traders grew confident that production levels would hold at historic highs, production plunged by 2 billion cubic feet a day amid maintenance activities in several supply basins. . Wood Mackenzie said its highest estimate of the day showed production falling to around 96 billion cubic feet per day on Tuesday.

About 850 MMcf/d of the decline was seen in Texas, with about 590 MMcf/d in the northeast, about 150 MMcf/d in the New Mexico portion of the Permian Basin, and about 120 MMcf/d in the Rocky Mountains.

In East Texas, a one-day event on Tuesday in the Southern Gulf along the 129 index impacted East Texas/North LA revenue by up to 100MMcf/d. A force majeure event on the Natural Gas Pipeline Co. of America also restricted approximately 495 MMcf/d on the Gulf Coast No. 3 Mainline between Compressor Stations (CS) 304 and 303 through Friday, August 12.

In the Texas portion of the Permian, declines were concentrated along El Paso Natural Gas with maintenance on Line 110 and at Afton CS which restricted around 50 MMc/fd through Friday. These events also impact the Permian of New Mexico, according to Wood Mackenzie.

In the northeast, the declines were centered in Pennsylvania, split evenly between the northeast and southwest parts of the state. In northeastern Pennsylvania, the decreases occurred along Transcontinental Gas Pipe Line Co. and Millennium Pipeline, but Wood Mackenzie said there were no maintenance notices posted. In southwestern Pennsylvania, the dips occurred along the East Texas Transmission System and Eastern Gas Transmission and Storage, but again no maintenance events. has been reported.

“However, there is maintenance along Equitrans Midstream on the Cain Ridge Compressor Station in the Eureka Lean Gathering System which is scheduled to end on August 11,” Wood Mackenzie analyst Laura Munder said.

Fall temperatures are approaching

Meanwhile, weather patterns changed little overnight, but midday data confirmed a cooling trend on the horizon. NatGasWeather said weather conditions from Wednesday to August 22 have changed from “solidly bullish” to now “only neutral”. This is most evident in the Central European pattern, which shows comfortable temperatures arriving in the Great Lakes and the eastern third of the country.

“When combined with strong production and soft LNG exports due to Freeport remaining offline, weekly storage builds have the potential to print more than normal for the second half of August” , said NatGasWeather.

Of course, the background remains bullish for now with storage deficits close to 335 Bcf, according to the forecaster. Conditions also remain warm in Texas, where high energy consumption is facilitated by light wind power generation in the state.

“The next two days of trading will be interesting to see if the bears step in to sell” Tuesday’s rally and defend $8, with more builds for the second half of August. Or will the bulls continue to find reasons to buy the dip, as they have in almost every case over the past year. says NatGasWeather.

“There will continue to be strong regional demand in the West, Plains and Texas, but with the Eastern US becoming quite comfortable most days going forward, the pattern is just not not as worrying as it has been,” he added.

Mobius Risk Group also warned that with very little form ahead of the Nymex curve, there is a relatively weak economic signal to inject ahead of winter. That said, core markets across the country over the past few months have taken the upper hand in terms of curve shape, he said.

Mobius pointed to the “remarkable” slope from close contracts to peak winter contracts, which then descend again for the summer 2023 injection season.

“That’s not to say the winter and summer shape of the Nymex isn’t significant,” said Mobius analyst Zane Curry. “In fact, it’s as steep as it has been for over a decade.”

However, regional markets are even more pronounced in this respect than the Henry Hub. An “additional wrinkle” is that many pitches are heavily reduced at the front of the curve, or heavily in contango for the month of March.

[Decision Maker: A real-time news service focused on the North American natural gas and LNG markets, NGI’s All News Access is the industry’s go-to resource for need-to-know information. Learn more.]

For example, Houston Ship Channel’s September base is nearly 50 cents behind Henry Hub, while January is trading at a premium of nearly 25 cents and Summer 2023 is back at a discount of 20, NGI’s forward-looking vision the data shows. In the Upper Midwest, the Chicago Citygate trades similarly through next summer.

“In a world where each market is forced to fend for itself with little help from neighboring localities, this is both a way to incentivize much-needed storage injections and, at the same time, a reflection on where to place them the most. more sensitive to summer balance Btu shortages,” Curry said.

Rise in spot prices

Spot gas prices were higher in most of the lower 48, even as the prolonged heat wave that blanketed the country this summer appears to be ending.

The National Weather Service (NWS) said cooler temperatures would begin to filter into the Great Lakes and the Northeast on Tuesday and continue through Wednesday. The cold front is expected to push in a southeasterly direction across the northern plains in the Upper Mississippi Valley and Upper Lakes region. Showers and thunderstorms developing ahead of and along the main cold front are expected to bring heavy rains and flash flooding from the Mississippi Valley to central Appalachia.

The cooler air should be a welcome relief for East Coast residents, some of whom have had to resort to dry ice for relief from the sweltering temperatures. New York City utility Consolidated Edison Inc. (Con Ed) distributed the dry ice in the Bronx to customers who lost power due to the intense heat. On Monday, Con Ed asked customers in four neighborhoods in the southwest borough of the Bronx to conserve energy while crews repaired equipment. It reduced voltage in the area by 8% to protect equipment and maintain service while crews carried out repairs.

Despite cooler temperatures, several Appalachian sites strengthened amid production declines seen on Tuesday. Next-day gas Eastern Gas South climbed 15.5 cents to average $7.255, and Transco-Leidy Line veered 8.0 cents to average $7.405.

Downstream in the Northeast, however, the losses were significant. Algonquin Citygate cash plunged 83.5 cents to $7,615 for Wednesday’s gas day, and PNGTS fell $2,895 to $9,730.

Elsewhere, Southeast locations rose 46.5 cents in Transco’s Zone 5, where spot gas prices averaged $9,780 for next day gas delivery.

Price increases were capped at about 30 cents across Louisiana, the Midwest and the Midcontinent. Similar gains were seen in Texas, although some places in the eastern part of the state saw larger increases. Spot gasoline prices in Carthage climbed 42.0 cents to $7,400, while Katy took 25.5 cents to $7,610.