Natural gas futures retreat amid bearish weather forecast


  • Comfortable temperatures are expected in Lower 48
  • It could take three weeks before the summer cooling demand starts
  • Analysts forecast a substantial increase in storage in May

Natural gas futures lost ground on Monday as traders reflected on declining demand due to weather conditions and the potential implications of a cybersecurity attack on the largest fuel pipeline in the United States.

The June Nymex contract fell 2.6 cents per day and came in at $ 2.932 / MMBtu. The month of July fell from 2.6 to $ 2.978.

NGI’s Spot Gas National Avg. advanced 5.5 cents to $ 2.745 amid a short-term round of cold temperatures.

Cool conditions over the Rockies, Midwest and Northeast early in the week could add further support to spot prices, NatGasWeather said. But after the cool temperatures subside by next week, it may take a few more weeks for consistent heat to arrive and usher in the summer cooling season. This could result in relatively modest demand for natural gas for most of May.

Over the weekend, national and European weather models canceled modest degree days, keeping the five to 15 day forecast “downwardly weighted, as comfortable temperatures prevail over large swathes of the United States. which will result in weak national demand “. said the forecaster.

“The first opportunity for more intimidating heat to show up on weather maps won’t come until the last week of May,” NatGasWeather said. “In our opinion, the longer it takes for heat to appear on the maps, the more likely it is that natural gas markets will become impatient. We continue to expect a warmer than normal summer over much of the United States; it just shouldn’t happen for two to three weeks. “

As a result, the company said it was forecasting the “biggest weekly builds so far this year” with US Energy Information Administration (EIA) storage reports in May.

Looking ahead to this week’s report, which will be released on Thursday, NGI’s model forecasts an injection of 82 Bcf for the week ended May 7. This would correspond to the average construction over five years. Last year, the EIA recorded an injection of 104 Bcf for the same week.

Other fundamentals remain in favor of natural gas prices, with production of nearly 90 Bcf – below pre-pandemic record levels – and still strong exports. Liquefied natural gas (LNG) volumes topped 11.5 billion cubic feet on Monday, within striking distance of all-time highs. Pipeline exports to Mexico are also holding up.

Cyber ​​security uncertainty

However, a cybersecurity attack late last week that forced Colonial Pipeline Co. to shut down its extensive network of refined products pipelines has created a wild card for traders in the energy markets.

With much of the system still offline on Monday, analysts said the ultimate implications remained unknown. But if the outage lasts several more days, it could lead to gasoline, diesel and jet fuel shortages across the East Coast just before the summer travel season and as major metropolitan economies reopen fully after long induced lockdowns. by a pandemic.

Gasoline futures edged higher on Monday.

“The Northeast’s gasoline supply reserve contains only about one million barrels, or less than a day of regional supply. Prices can skyrocket if stocks are depleted before the pipeline restores service, ”EBW Analytics Group said Monday. “With no reported physical damage to the pipeline, however, the pipeline may be able to quickly restart service at any time.”

The Colonial system, which spans more than 5,500 miles, transports more than 100 million gallons of fuel per day. The company transports nearly half of the East Coast’s fuel supply from the Gulf Coast.

The Georgia-based company said it was the victim of a ransomware attack that infiltrated some of its information technology (IT) systems. He did not say if he had paid a ransom. He said investigations were ongoing and had not yet announced when the company’s system would fully resume operations. Analysts said the problem was that hackers could potentially move from the computer network to pipeline operations.

While the incident does not impose direct impacts on natural gas, analysts said it fueled a broader concern about the vulnerability of the U.S. energy sector. This could intensify if the colonial system goes offline long enough to create supply problems and pressure on prices.

[VIEW PRICING NOW: NGI’s Mexico Gas Price Index calculates natural gas pricing on the border and within Mexico daily.]

“It is not often that hackers manage to strike oil infrastructure as crucial as the Colonial pipelines in the United States, but such an event and the associated fear of prolonged blackouts have invaded the minds of traders,” said Louise Dickson, analyst at Rystad Energy.

Spot prices rebound

The next day’s spot prices rose as cool temperatures to start the week fueled demand from the Rocky Mountains to the East Coast.

In the Rockies, Kern River climbed 9.0 cents to $ 2,800 and Opal also picked up 9.0 cents to $ 2,800.

In the East, Algonquin Citygate gained 14.5 cents to $ 2.675, while Millennium East Pool advanced 16.0 cents to $ 2.165.

NatGasWeather said regional cooling demand could persist during the trading week.

“Weather systems and the cool blows associated with showers and thunderstorms will continue across the plains, Midwest and Northeast this week, with highs of 40 to 60 and lows of 30 and 40,” said the forecaster.

“Cooling will also push in Texas, in the south and southeast,” with highs of 70 to 80 for light demand. The northwest will be nice with highs of 60 and 70, ”NatGasWeather said.

The company said air conditioners could start this week in parts of California and the southwest – where highs in the 80s and 90s are expected – could potentially boost price dynamics in those areas.

On Monday, SoCal Citygate jumped 40.5 cents to $ 3.370, while Kern Delivery rose 21.0 cents to $ 2.995.

On the pipeline front, Columbia Gas Transmission announced that it would begin maintenance work on its 1983 pipeline Tuesday, cutting flows at its meter in Wetzel County, WV. The work was postponed from the beginning of the month due to bad weather.

Wood Mackenzie estimated that the Smithfield-Mobley interconnector would be reduced to zero total capacity on Tuesday. Meter revenue has averaged 170 MMcf / d over the past 30 days, the company said.


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