Natural gas attackers rally to futures as market resonates with summer excitement


Riding the momentum of the futures price rally as the natural gas market begins to look optimistically into the summer, expectations confirmed by double digits throughout much of the Lower 48 during the trading week from April 22 to 28, NGI Looking to the future data exposure.

With continued strength in export volumes – via liquefied natural gas (LNG) and the pipeline to Mexico – supplying the fuel and lower maintenance-related production creating the spark, the May Nymex Henry futures contracts Hub jumped nearly 20 cents in the three days leading up to Wednesday’s contract expiration.

As the June contract retreated into its first day as a quick month on Thursday, May’s upward price run laid the groundwork for widespread gains in futures trading in many places during the period from 22 to April 28.

Fixed prices for a quick month for May delivery to the Henry Hub benchmark have soared 19 cents more week / week, according to Looking to the future The data. The June fixed prices increased by 14 cents per week.

Wood Mackenzie’s daily production estimates earlier in the week showed a significant 2.4 Bcf / d day / day drop in Lower 48’s supply.

“The most significant impacts are concentrated in the Northeast, where there is planned pipeline maintenance as well as what appears to be unannounced field maintenance by an operator,” wrote analysts Nicole McMurrer and Laura Munder. by Wood Mackenzie, in a note to clients.

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Analysts have highlighted the impacts on flows in northeastern Pennsylvania as part of the maintenance of the Millennium Pipeline. Maintenance events on the Nexus Gas Transmission and Rockies Express pipelines have contributed to flow restrictions in Ohio, according to McMurrer and Munder.

Restricted flows have given an upward push to futures prices, but recent pipeline maintenance has proven to be unfavorable for price transmission to supply hubs in the Appalachian Basin.

The negative differentials based on fast months at Millennium East Pool and Transco Leidy widened further over the past week. Millennium East Pool base fell 19 cents to trade $ 1.156 / MMBtu back for Henry Hub, while base Transco Leidy slipped 11 cents to minus $ 1.778. Tennessee Zn 4 Marcellus also fell 16 cents to minus $ 1.771 during the period.

Points in the Mid-Atlantic, meanwhile, fared much better. Transco’s Zone 5 fixed prices for May rose 29 cents to $ 2.923, with the base improving 12 cents month / month to trade roughly flat with Henry. Dominion Energy Cove Point’s monthly fixed prices jumped 53 cents to $ 3.153. In baseline terms, this marked an improvement of 35 cents month / month for the hub, which ended the period with a premium of 22.8 cents against the national benchmark.

Elsewhere in Lower 48, the hubs rallied alongside Henry, recording gains of around 15 to 25 cents. In the Midwest, Chicago Citygate’s quick month fixed prices gained 15 cents to $ 2.827, while on the West Coast, Malin gained 14 cents to $ 2.826.

From a national perspective, the recent rally in natural gas prices has been driven by a combination of fundamental and technical factors, according to analysts at EBW Analytics Group.

“Cold weather in mid-April helped kick off the rally,” and a series of bullish misses from the Energy Information Administration‘s (EIA) weekly storage reports “extended the gains,” analysts said. EBW. It comes as “production has dipped” and “pipeline exports to Mexico and LNG exports have all surprised on the upside. The fundamentally induced gains have contributed to the emergence of favorable technical models. “

Despite a “mixed” near-term picture for futures prices, there remains “considerable margin” on the rise on a seasonal basis, even after factoring in recent gains, according to the firm.

“The most likely injection season trajectory suggests the market could be undervalued by 2.9 Bcf / d,” EBW analysts said. “Long-term modeling until next winter implies that, even after the recent Nymex rally, the market remains under-supplied by nearly 1.0 Tcf over the next 11 months in the most likely scenario. “

Recent projections on the balance sheets below 48 of the energy aspects showed no weekly triple-digit storage build-up for the month of May.

“It’s not historically unusual, as May 2018 only had one, and 2016 and 2017 didn’t,” the company said in a note to customers. “… Our recent alerts have generally focused on the amount of demand growth available to the market this summer, compared to last year’s market centered on the degree of demand destruction.”

Weather aside, scheduled maintenance on Columbia’s gas system, cross-border flows from Mexico and the extent of LNG capacity utilization could all potentially sway the balances in May, according to Energy Aspects.

Recent readings of electricity use showed no signs of impact from rising physical prices, a trend the company attributed to “lower renewable energy production in recent weeks and blackouts. longer unplanned nuclear, refueling and reduction of Indian Point 3. As load begins to increase “Along with cooling degree days in the coming weeks,” more of the gas fleet will be called online, which will tighten the balances. “

Meanwhile, looking upstream, drilling activity in North America has clearly shown an uptrend in 2021, recovering from the Covid-induced contraction in 2020.

The latest Enverus Rig Analytics tally showed that 521 US rigs were up and running as of Wednesday, April 28.

“Activity levels in the United States continued to rebound last month, with 26 platforms added,” the company said. “The most notable changes have occurred in the Midcontinent (up to 12 to 41), the Gulf Coast (up to 7 to 65) and Ark-La-Tex (up to 6 to 60).”

The explanation behind these changes is simple, according to Enverus.

“More and more operators are drilling wells,” the company said. “In the Midcon, 34 companies are active, against 22 a month ago. Active Gulf Coast operators increased from five to 47 and Ark-La-Tex drillers from two to 25. On the Gulf Coast, Hilcorp moved to two rigs after a seven-month hiatus. Gulfport Energy is operating a platform in the Midcontinent for the first time in five months.

“For operators already active, notable increases include Chesapeake Energy. The company has moved to a three-rig program in the Haynesville Shale after averaging two for the past three quarters and is operating a rig on the Gulf Coast for the first time in 10 months.

Figures from the Enverus platform are mixed with comments oil officials shared on the latest round of quarterly earnings conference calls.

“More and more green shoots are emerging in the oilfield, particularly at Wellbore Technologies and particularly in North America,” NOV Inc. CEO Clay Williams said on Wednesday. “While we still face headwinds in many markets, we continue to believe the worst is behind us.”

North American activity has been strong since the start of the year, according to recent comments from Schlumberger Ltd. CEO Olivier Le Peuch.

“We are seeing sustained growth in activity on US lands,” with a “seasonal rebound” across North America, “particularly in construction works,” the executive said. “Our new mix and the considerable explosion of the North American market will increasingly contribute to our results.”

High oil prices are helping “a healthy recovery” in upstream activity in North America, Jeff Miller, CEO of Halliburton Co., told analysts in his company’s recent quarterly earnings call.

“Shale miners have a larger portfolio of economically viable projects. As a result, the average number of land-based platforms in the United States increased 27% sequentially in the first quarter, outpacing growth in completed stages, ”Miller said.

“We still expect the majority of our customers to remain committed to a disciplined capital program this year, but what we are seeing today strengthens our confidence in a steady pace of activity for the rest of the year. , while operators strive to maintain their production capacity. “


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