As European natural gas prices continue to decline and US fundamentals remain firmly in bearish territory following the government’s latest storage report, futures prices fell early. November’s Nymex contract hit an intraday low of $ 5.393 / MMBtu, but rose significantly given little change in the global context, settling at $ 5.677 on Thursday, up two tenths of a hundred day / day.
In one look :
- EIA reports huge injection of 118 Bcf
- Global markets reach new heights
- Warm weather keeps control of the money
Spot gas prices plunged further, sending NGI’s Spot Gas National Avg. down 27 cents to $ 5.445.
With pleasant fall weather expected to last at least a few more weeks – and storage stocks are expected to swell further because of it – there is not much to be excited about in the domestic market. This was made clear on Thursday after the latest data from the Energy Information Administration (EIA) indicated that inventories were quickly closing the gap from the five-year average.
The EIA reported an astonishing 118 billion cubic feet injection for the week ending October 1, about 10 billion cubic feet above market consensus and even above the highest estimate before The report.
Projections in a Bloomberg survey ranged from constructions of 101 Bcf to 114 Bcf, with a median injection of 105 Bcf. A the Wall Street newspaper the poll included injections as low as 84 Bcf, but the average still landed at 102 Bcf. The Reuters poll was larger, with high estimates reaching 115 billion cubic feet and the median injection at 104 billion cubic feet. NGI modeled an injection of 114 Bcf.
For comparison, the EIA recorded an injection of 75 Gcf in the same week last year, while the five-year average construction is 81 Gcf.
The EIA’s 118 Bcf figure was the second in a row that surprised on the upside. Participants in The Desk Enelyst’s online chat attributed the massive injection – the largest for the reference week in a decade – to strong wind generation which took a share of the gas market.
“For the week ending October 8, it looks like the wind is halfway through the past two weeks,” said Enelyst Managing Director Het Shah.
Bespoke Weather Services chief analyst Brian Lovern called the 118 billion cubic foot injection “a very ugly number” in terms of supply / demand balance. Using recent reviews and extrapolating to the future, he said the market is now close to reaching the five-year average in terms of end-of-season storage levels, above 3.7 Tcf.
“We are seeing a tightening in data this week though, so our end-of-season estimate is below that level, for now,” said Lovern.
Reflecting Shah’s comments, Lovern said the expected tightening appears primarily to be related to very low wind output. However, the winds are expected to reverse sharply over the weekend and early next week, “so we may relax again as we see data for next week.”
Broken down by region, the Central-South region posted a sharp increase of 41 Bcf in storage stocks, including 21 Bcf of salt-free facilities and 20 Bcf of salts, according to the EIA. The Midwest added 37 billion cubic feet to stocks and the East added 31 billion cubic feet. Stocks in the mountain and Pacific regions each increased by 5 billion cubic feet.
As of October 1, total gas in inventory stood at 3,288 billion cubic feet, which remains 532 billion cubic feet below year-ago levels and 176 billion cubic feet below average quinquennial, the EIA said.
Is winter coming?
Despite the clearly bearish storage data, prices rebounded from lows shortly after the release of the EIA report. This could be due to the fact that a high injection figure was expected. It could also be because more stringent conditions are expected next week.
However, traders may also have been hesitant to send much lower prices given the tight overseas supply environment and the likelihood of strong export demand in the coming months.
“The setup is always exciting as winter approaches, but this winter is more interesting than most,” Eric Fell, senior gas analyst at Wood Mackenzie, told Enelyst.
Throughout the summer and into the fall, the potential for an energy shortage this winter weighed heavily on the Asian and European gas markets and, by extension, the US market. Although feed gas volumes to U.S. terminals are far from recent highs due to maintenance, export demand is near its highest levels ever as the two regions compete for the supply before the colder weather. In addition, feed gas deliveries to US terminals are expected to increase year over year with the commissioning of two new liquefaction facilities which are expected to increase capacity to over 12 Bcf / d.
Wood Mackenzie analyst Eric McGuire joined Fell on the Enelyst chat Thursday, noting that the market is in a unique place where the entire global market is strained. “It’s not just in gas, but the tight balances in the coal market are further fueling this price competition in Europe,” McGuire said.
Supply issues have simmered for months and yet no real solution has been found, according to McGuire. “In other words, we don’t see enough supply creation or demand destruction at these astronomical prices to balance the market.”
A possible solution could come from Russia. While uncomfortable with its past dependence on Russian supply – and despite efforts to diversify its supply offer – Europe could start receiving additional gas from the country in weeks. and the months to come. Russian President Vladimir Putin told a televised meeting on Wednesday that the country could export record volumes of gas to the continent this year.
Linepack started on Nord Stream 2 (NS2), considered an essential link in bringing more gas from Russia to Europe. Nonetheless, regulatory hurdles remain, including a European Union requirement that ownership of transmission assets and natural gas supplies be separated. It could ultimately take months to certify that the system is in compliance.
The 5.3 Bcf / d NS2 is also facing political resistance. Rather than pushing to restart trade operations on the system at a time when the continent is running out of gas, a group of EU lawmakers in parliament this week pushed the bloc’s executive to ensure the pipeline fully complies with all applicable laws, citing concerns about energy security.
News of a possible increase in supply caused European prices to plummet on Wednesday. Asian prices also joined the decline on Thursday.
Mobius Risk Group analysts viewed the recent price decline as “reactionary”. Mobius’ team said it continued to see asymmetric downside and upside risk “favoring the latter.”
Over the next 10-day week, the most important fundamental drivers for the top three markets would likely be late October weather forecasts and inventory data from North America and Europe.
Although mild in the Lower 48, Europe has started to see the cold set in, “exacerbating an already dire inventory situation”, according to Mobius.
Basically, EBW Analytics Group said that Russia is replenishing its national storage at an increased rate after the cold weather of last winter. It is estimated that 500 Bcf (2.3 Bcf / d) of above normal injections materialized this summer.
“While the weather at the start of winter was cold in Russia and boosted Russian demand, with maximum storage, that additional supply which is no longer needed for above-average injections can be redirected to the Europe, ”said the EBW team.
Either way, we are barely in October and the whole winter season has yet to take place. The US winter outlook shows a continuation of the above-average temperature trend that occurred last winter. In this case, Fell said there is at least $ 2.00 off if we have a normal / mild winter. “
“However, there is more than $ 20 hike based on current world prices in the colder winter scenarios. All eyes are on weather and international prices.
With temperatures neither too hot nor too cold, spot gas prices have continued to hit recent highs.
Losses remained significant even after Wednesday’s liquidation, with the country’s mid-section recording losses of around 30 cents. Henry Hub’s cash fell 26.0 cents to $ 5.690 and Southern Star fell 37.5 cents to $ 5.255.
From Friday until October 18, the Tennessee Gas Pipeline (TGP) is expected to replace the pipe at the Whiskey Chitto River Crossing in Louisiana. The event could reduce KNLINE’s operational capability at Allen to zero, resulting in a potential maximum reduction of 235 MMcf / d. Flow data from the Wood Mackenzie Pipeline indicates that over the past 30 days, KNLINE has averaged 180 MMcf / d and peaked at 235 MMcf / d.
The TGP notice also states that ELIZ NG / TGP GRANT LA SALES ALLEN will be closed for maintenance, but this location has not supplied gas for several months, according to analyst Kara Ozgen.
In the Midwest, Emerson lost 45.0 cents to $ 4.795, and in Texas, Waha lost 40.5 cents to $ 5.170.
Likewise, significant losses were seen on the east coast, as cooler weather moving into the Rockies tempered declines in several places there. Northwest Wyoming Pool only slipped 9.5 cents to $ 5.910.