The first day of January’s natural gas bidweek brought soaring baseload prices for Western Lower 48 hubs and healthy premiums for East Coast markets, according to NGI’s Bidweek Alert.
Fixed prices at SoCal Citygate were seen in the $60-$61/MMBtu range on day one of bidweek trading Friday. Farther north, Northwest Sumas fixed prices ranged from $46 to $53.50.
Western markets have been no stranger to price spikes this season; the West Coast bore the brunt of wintry weather during an otherwise mild start to December for the Lower 48, one of a number of factors that have contributed to elevated physical market prices out West this month.
Regional storage dynamics help to shed light on the elevated pricing observed in the West during the winter so far. For the week ended Dec. 16, the Energy Information Administration’s (EIA) Pacific region saw a net withdrawal of 17 Bcf, leaving inventories at 186 Bcf. That’s more than 30% shy of the 267 Bcf five-year average for this time of year, EIA data show.
Day one of bidweek trading on the East Coast, meanwhile, suggested comparatively less concern about upside price risks heading into January. Transco Zone 5 basis came in at $10 above Henry Hub, Bidweek Alert data show. That would reflect a sizable discount versus pre-Christmas spot pricing.
Amid the arrival of intense wintry weather just in time for the holidays, physical prices spiked along the East Coast in Thursday’s trading, Daily GPI data show. Day-ahead prices for Transco Zone 5 averaged north of $60.
Spot prices remained elevated along the East Coast and for numerous Western hubs on Friday as traders attempted to price in weather impacts for volumes flowing over the extended holiday weekend.
“California and Transco Zone 5 are both struggling with constraints at major import points,” Wood Mackenzie analyst Colette Breshears told clients Friday.
California is “sorely missing” volumes from El Paso Natural Gas Line 2000, “which would have helped supply the last few days ahead of major freeze-offs in the Permian Basin,” Breshears said.
Transco’s Zone 5, meanwhile, is “constrained by full pipeline conditions bracketing the region from the north and south,” the analyst said. “Zone 5 has the additional difficulty of needing to source supply from the freezing production regions in Marcellus/Appalachia and competing with the large demand native to Transco Zone 6 to the north.”
Compressors farther south in Transco’s Zone 4 were “choked” with molecules from the Texas/Louisiana/Gulf of Mexico region attempting to head north to satisfy demand, “even as cold temperatures threaten to roll across population centers along the Gulf Coast,” Breshears added.
The freezing conditions also appeared to impact the supply side of the equation Friday, at least in the short-term, according to EBW Analytics Group.
“Pipeline scrapes indicate production freeze-offs have eclipsed 5.0 Bcf/d,” EBW analyst Eli Rubin said.
Still, updated forecasts Friday continued to advertise far more comfortable conditions for the Lower 48 after Christmas.
For the six- to 10-day period, covering Wednesday through New Year’s Day, most of the country will return to warmer than normal temperatures, according to Maxar’s Weather Desk.
“This includes the East Coast, where lingering belows are on day six but much to strong aboves are on days nine and 10.”
The 11- to 15-day period will carry over a “similar pattern” from the six- to 10-day, delivering “widespread above normal temperatures,” according to the forecaster. “This includes much aboves in the Eastern Half, where the forecast is additionally warmer than in the previous outlook.”
Midday data from the American weather model maintained an “emphatically red/bearish” temperature outlook between Wednesday and Jan. 6, showing “record warmth” for the eastern half of the Lower 48, according to NatGasWeather.
National demand will “drop to very light levels” during this period as temperatures come in 20-35 degrees above normal, the firm said.
“How long this warmer than normal pattern extends into January will be of great interest, since the longer it holds, the more likely prices continue to grind lower,” NatGasWeather added. “We currently expect temperatures will return to more seasonal levels by mid-January, but confidence in timing/details is low that far out.”
Bidweek traders on Friday were also left to factor in an updated outlook from the Freeport LNG terminal on the timing of its highly anticipated return to service. The operator said it was pushing back its expected restart to mid-January.
Freeport representatives said the majority of the work to restart operations after a June explosion knocked the 2.38 Bcf/d terminal offline was “substantially complete.” However, after submitting responses to dozens of questions asked by FERC in a Dec. 12 request, the company estimates final approval could take longer than expected.
The latest Freeport news came as “no surprise” given that “this is what many market participants were already expecting,” according to NatGasWeather.