Natural gas futures flirt with $ 6 again when in early November they were much colder; Strong Cash


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Natural gas futures were targeting the skies on Monday as a much colder turn in weekend weather patterns catapulted prices. Helped by a surge in demand for liquefied natural gas (LNG), as well as upcoming contract expiries, the November Nymex gas futures contract jumped 61.8 cents to $ 5.898. December climbed 59.5 cents to $ 6.056.

In one look :

  • The endurance of cool weather is unclear
  • Storage capacity above normal expected
  • Storms Generate Huge Gains For Spot Prices

Spot gas prices also started the week on a solid footing as several weather systems followed across the United States. Spot Gas National Avg from NGI. climbed 62.5 cents to $ 5.565.

With weather patterns at the end of last week starting to show signs of cooler air seeping into the Lower 48, the bulls were quick to jump on the data. The November futures contract rose nearly 20 cents on the open and traded at an intraday high of $ 6.008.

Interestingly, the latest forecast isn’t exactly bullish. On the contrary, the additional demand reflected in the models simply aligns more with historical levels. However, Bespoke Weather Services said it was still a drastic change from the ambient temperature. In addition, there is the risk that some days will be even a little colder.

That said, the models seem more “tame” on days 14 and 15, so it’s not yet clear that this is a lasting change, according to Bespoke. “Mid-range models have tended to be underrated on the hang-up, and if that continues, this model change could indeed be more durable,” he said. “… If the blockage goes away, things could heat up quickly.” “

As for timing, domestic demand is expected to be moderate through Tuesday due to weather systems on the west and east coasts, as well as persistent heat in Texas, according to NatGasWeather. Demand is expected to be low Wednesday through Sunday before the cooler weather arrives.

The forecaster said the period from the end of this weekend to the first week of November is when the patterns have become progressively colder. Weather systems over the northern and eastern United States are seen drawing some cooler air over southern Canada. Overnight lows are expected to fall in the 1920s to 1940s, fueling demand in the process.

“These are not ice systems to start November, and the trend is not upward. It’s just better than the past five weeks for more seasonal national demand, ”NatGasWeather said.

Is LNG feed gas back for good?

Meanwhile, demand for LNG jumped nearly 1 billion cubic feet per day to exceed 11 billion cubic feet on Monday amid increased inflows at the Sabine Pass and Freeport terminals.

Since the beginning of September, Freeport’s LNG demand has been on average slightly less than 1.7 Gcf / d, 0.5 Gcf / d less than the maximum capacity demonstrated due to multiple operational problems. EBW Analytics Group said reports have surfaced of gas quality issues that have resulted in wax buildup in pipelines. This could limit planned LNG exports from the Freeport terminal until November until the issue is resolved.

“We have lowered our projections for LNG export demand by 0.5 Bcf / d – reflecting recent below-capacity demand – through November, thus partially offsetting the impact of the weekend’s bullish climate change on our seasonal storage trajectory, ”EBW analysts said.

Early indications for the government’s next inventory report point to another larger-than-normal increase. NGI modeled an inventory increase of 94 Bcf for the week ending October 22. This would be comparable to the injection of 32 Gcf last year and the five-year average construction of 62 Gcf, according to the Energy Information Administration.

[Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.]

In the long run, however, EBW said export demand is expected to be high due to global supply issues. Although sustained cold has not yet developed in Europe and Asia, demand has remained strong with the aim of building up stocks before the main winter season. The demand for feed gas in the United States reached record levels during the summer, and two liquefaction facilities are expected to come on stream in the coming months. When complete, the demand for feed gas could approach 13 Bcf / d.

In a cold winter scenario, there are few short-term fundamental stops to reduce demand or increase supply to calm the market before prices hit double digits, EBW warned. This underlying fear remains palpable, for now, and prices should rise if the forecast changes to the upside.

“If November and December do not show any significant cold, however, natural gas futures could fall back into the low range of $ 4.00 / MMBtu by the end of the year,” analysts said. from EBW.

Another bomb cyclone?

Spot gas prices rose huge gains to start the week as several weather systems moved across the country.

The East Coast had the biggest gains, as the season’s first Nor’east could become the third bomb cyclone to hit the United States in days. AccuWeather said the storm was spreading northeasterly winds along the Mid-Atlantic coast and is expected to strengthen quickly as it moved along the east coast. As it does, the storm could undergo a period of rapid intensification to become a bomb cyclone.

The Nor’easter was scheduled to become stationary off the northeast coast on Monday evening, according to AccuWeather. Heavy rains were expected to move through the New York City area before spreading across central and southern New England on Tuesday, where they could continue to dump rain.

The heaviest precipitation is expected in Connecticut, Massachusetts and Rhode Island. AccuWeather said a range of four to eight inches is expected in those states.

Two similar storms developed in the northern Pacific and hit the west coast late last week and over the weekend.

Elsewhere, total precipitation of two to four inches was forecast from extreme southern Maine to eastern New York and much of New Jersey.

In the Appalachians, spot gas prices at the Millennium East Pool jumped from $ 1.005 to $ 5.360 on average for Tuesday’s gas delivery. Several other locations in the region brought in over 90.0 cents that day.

On the pipeline side, Rockies Express Pipeline plans to do work that could limit up to 116 MMcf / d of westbound flow in Ohio on gas days Tuesday through Thursday. Work at the Washington Compressor Station would limit flows through SEG 380 to 2,791 MMcf / d.

Over the past 30 days, flows through SEG 380 have averaged 2,836 MMcf / d and peaked at 2,907 MMcf / d, according to Wood Mackenzie. Based on these historical values, flow reductions could total 116 MMcf / d.

Further downstream in the northeast, cash at Transco Zone 6 NY jumped 96.0 cents to $ 5.435, and Algonquin Citygate rose 98.5 cents to $ 5.635.

While the West Coast is still feeling the effects of its parade of storms, gasoline spot prices have also continued to strengthen. El Paso S. Mainline / N. Baja rose 88.0 cents to $ 6.220. Next day gas from the Northwest Wyoming Pool rose 77.5 cents to an average of $ 5.735.

Gas Transmission Northwest (GTN) is also about to begin a maintenance event that could dampen flows along the pipeline system. Starting Tuesday and through the end of the year, GTN plans to carry out work at the Bend Compressor Station, reducing flows beyond Station 14 by 202 MMcf / d. The reduction potential of guaranteed primary and secondary services varies throughout the scheduled maintenance event.

Wood Mackenzie analyst Quinn Schulz said the operational capacity of Station 14 will remain at 1705 MMcf / d for the duration of the work. The Bend Compressor is located near Bend, Oregon, and it transports gas imported from Canada south for delivery on the PG&E, Tuscarora and Ruby pipelines.

Likewise, large increases were seen across California, while upstream in the western Texas portion of the Permian Basin, Waha spot gas climbed 54.0 cents to an average of $ 5.225.

Meanwhile, Pacific Gas & Electric Co. said it was continuing to restore power to some 380,000 customers who lost it during the weekend storms. About 7% of the 5.5 million utility customers lost electricity due to high winds associated with storms. Around 125,000 customers were still without power in the last update.

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About Keith Tatum

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