Cooler temperatures push weekly natural gas prices down, but light stocks keep pressure on futures


Natural gas spot prices softened as the Memorial Day holiday returned, even as electricity usage rose in response to lower wind generation throughout the week. Led by West Coast, Weekly Spot Gas National Avg. fell 19.5 cents during the May 31-June 3 period to $8.145/MMBtu.

Natural gas futures, meanwhile, continued to rock like a rag doll. Amid wild swings in production, warmer forecasts at the end of June, and a pesky storage shortfall that showed little sign of improvement, Nymex July gas closed the week at $8.523, up 37.8 cents from Tuesday’s settlement.

With the most significant heat in the southern United States, prices there have not shown declines as steep as in other parts of the country. In addition to the seasonal rise in temperatures, gas demand also strengthened this week as wind generation fell from weekend highs.

Agua Dulce silver was seen in a 60.0 cent band throughout the week, averaging 28.5 cents lower at $8,160. Texas Eastern E. TX slid just 11.0 cents to $8,070.

And although temperatures have already hit the 90s across Texas, forecasts call for even warmer weather in the coming days. Triple-digit highs in San Antonio and cities further south are expected.

Meanwhile, the rest of the country was quite comfortable this week, with daytime temperatures ranging from the 60s to the 80s. NatGasWeather said weather systems with tracked showers across the interior of the United States to reduce demand national at lighter levels.

As such, prices have fallen from the highs seen last week when warmer weather was in play. Alliance cash averaged $8.105 in the short week, down from 26.0 cents. El Paso Anadarko fell 30.0 cents to $7,750.

Huge trading ranges were seen on the East Coast, where early season heat at the start of the week boosted demand for gas for cooling. Algonquin Citygate hovered between $7,900 and $11.00 before hitting an average of $8,345, up 19.5 cents on the week. PNGTS traded as high as $12,000 and rose an average of 70.0 cents on the week to $9,590.

Are higher prices coming?

Futures prices continued to oscillate strongly during the first days of June – despite an environment that slipped very little.

On Tuesday, however, there were signs that production had finally taken a step forward after being subdued throughout the spring. Estimates indicated production near highs of 97,100 cfd seen in late December. But those gains were quickly erased mid-week, with production data showing steep declines in several parts of the country. On Friday, production had started to recover, but there appeared to be some uncertainty as to how quickly supply could rise again to recent highs.

Analysts largely agree that more significant production gains are likely story for the second half of 2022. Until then, they expect little improvement in the dire storage situation the market is currently facing.

The Energy Information Administration (EIA) said inventories in the week ending May 27 rose only 90 billion cubic feet. That was 10 billion cu ft less than construction the same week last year and the five-year average injection.

However, it was a few billion cubic feet higher than the market had expected and as a result, futures contracts fell accordingly.

On a weather-adjusted basis, the market was in surplus by about 2 Bcf/d in the benchmark week, according to Tudor, Pickering, Holt & Co. (TPH). That compares to the undersupplied market of 1 Bcf/d the previous week, he said.

Eastern inventories posted the biggest gain of the week, climbing 32 billion cubic feet, according to the EIA. Midwestern stocks rose 29 billion cubic feet, while the Pacific and Mountain regions added a combined total of 9 billion cubic feet.

South Central reported a net injection of 20 billion cubic feet, which included a withdrawal of 3 billion cubic feet from salt facilities.

Total working gas in storage as of May 27 fell to 1.902 billion cubic feet, down 397 billion cubic feet from last year at this time and 337 billion cubic feet below the five-year average, according to the EIA.

Looking at demand data for the current week, TPH said power generation was 32.3 billion cubic feet per day, about 4.4 billion cubic feet per day ahead of standards. of recent days. After a temporary period of around 13 Bcf/d, liquefied natural gas feed gas deliveries fell slightly this week, averaging 12.7 Bcf/d with lower processing activity at Sabine Pass , pushing volumes below 12 Bcf/d earlier in the period.

Supply remains “hot”, according to the TPH team, as volumes averaged 95.6 Bcf/d throughout the week, but fell to 95.8 Bcf/d. Production from the main basins averaged 49.9 Bcf/d (up 0.6 Bcf/d week/week) and peaked at 50.2 Bcf/d. This is the first time in TPH’s tracked dataset (2019-2022) that production from the main basins has exceeded 50 Bcf/d.

According to TPH analysts, the decision was largely driven by the Marcellus Shale, which added 0.4 Bcf/d this week and sits at a 0.3 Bcf/d surplus over year-ago levels. . On the associated gas front, Permian Basin volumes have fully recovered and averaged 14.1 billion cubic feet per day this week after temporarily hitting as low as around 13.3 billion cubic feet. per day the previous week.

Looking ahead to the upcoming EIA storage report, preliminary modeling from TPH points to a build of 95 billion cubic feet, tighter than the five-year average. construction of 100 Bcf.

EBW Analytics Group noted that the Nymex curve remains shifted for the rest of the injection season, with short-term futures trending gradually lower through October. While the balance between supply and demand could loosen later in the year as production increases and weather-driven demand declines, EBW said the shape of the curve could make it more difficult for the market to catch up with storage injections.

“While local distribution companies will inject gas into storage to meet anticipated winter needs, the paltry winter premiums do not provide enough incentive for traders to arbitrate seasonal injections,” said Eli Rubin, senior analyst at EBW.

Additionally, heat builds up in the south-central region, inevitably leading to higher electrical loads and likely gas demand. “If the price of natural gas is set to meet near-term needs instead of injecting gas for the coming winter, the weak storage trajectory could exacerbate upward pressure by the end of the year. summer, when the market traditionally focuses on winter supply adequacy,” Rubin said.

Cash in ruins

Spot natural gas prices reversed gains ahead of the weekend, with what AccuWeather calls a “pleasant slice of weather” on the East Coast and generally subdued weather elsewhere in the Lower 48.

AccuWeather said temperatures could be 15 to 25 degrees lower Saturday than Tuesday in some mid-Atlantic cities. New York, for example, recorded a high of 93 on Tuesday (May 31), but could see daytime highs hit the 70s by Saturday.

“While the incoming air over the weekend and this weekend will not be as crisp as some early spring batches of cool, dry air, this should be enough to bring many areas a comfortable weekend with little to no chance of rain,” AccuWeather senior meteorologist Alex Sosnowski said.

The exception is New England, which is expected to remain cloudy and cool. After emerging from a weak offshore storm in New England, a reinforcement of cool air is expected to spread to the Great Lakes and New York, which should send temperatures 5 to 10 degrees below normal for early June.

Cool weather sent spot gas prices in Iroquois, Area 2 down 62.0 cents to $8,095 for three-day delivery through Monday. Tennessee Zone 4 Marcellus fell 43.0 cents to $6.955.

However, it’s not all cupcakes and rainbows in Texas.

AccuWeather said from Sunday that a northward shift of the jet stream would allow unusually warm air to exit Mexico and infiltrate parts of the south-central states as well as the Four Region. Corners. The most intense part of this warm air is expected to settle over a wide swath of Texas and remain in place for much of the start of the week, with temperatures in many places expected to hit triple-digit readings.

“Temperatures will be more typical of the height of summer than the start of summer,” said AccuWeather senior meteorologist Paul Walker. “The energy grid could be under pressure with air conditioners and fans constantly running to try to keep people comfortable,” Walker said.

The Texas electric grid operator forecast load to reach 61,294 MW on Friday, then increase to 65,790 MW on Saturday, 68,533 MW on Sunday and 74,143 MW on Monday.

During the last heat wave in May, six natural gas power plants cut off supply to 3,101 MW and prompted the electricity grid operator to call for conservation measures.

Despite the sweltering conditions at the tap, spot gasoline prices continued to decline. Deep discounts were seen across Texas, with several locations slipping below the $8,000 mark. Houston Ship Channel fell 32.0 cents to $8,085, while El Paso Permian fell 41.0 cents to $7,685.

Midwestern markets were down more than 50 cents in several places. Chicago Citygate slipped 53.5 cents to $7,975.

Some outlets in California, meanwhile, were down nearly $1,000 on the day. Malin fell 93.5 cents to $7,795.


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