Prices in the physical market catapulted higher Monday amid forecasts for widespread bitter cold by the weekend, then gave up ground the next two days amid benign near-term conditions, and then surged back ahead once again after freezing air advanced into the Midwest on Thursday to cap a holiday-abbreviated trading week.
NGI’s Weekly Spot Gas National Avg. for the Nov. 7-10 period ultimately climbed 45.0 cents to $4.205. The trading stretch was cut short by one day because of Veterans Day on Friday.
At the close of the week, top gainers included several hubs in the West and Mountain West, where a cold snap first emerged before pushing into the central United States. SoCal Citygate gained $1.455 to $8.495, while Northwest Sumas climbed $1.225 to $8.315 and Questar rose $1.420 to $7.690.
Prices in West Texas advanced, too, though they were still coming off steep lows after briefly flipping negative in late October. Maintenance work in the region backed up supplies at the time and cratered prices. It was “an indication of just how vulnerable and sensitive” the Permian Basin is to midstream constraints, RBN Energy LLC analyst Sheetal Nasta said. “The outages provided a good preview of just how little spare capacity is available on the intrastate pipelines leaving the basin.”
Weekly spot prices at Waha, the West Texas region’s benchmark, advanced 18.5 cents to $2.435.
The December Nymex contract, meanwhile, rallied in concert with the cash market, making gains on Monday and Thursday, but it fell short of advancing for the week after shedding more than $1.00 over the course of Tuesday and Wednesday. The prompt month settled at $6.239/MMBtu Thursday, up 37.4 cents day/day but down 2.5% from the prior week’s finish.
“Strong national demand remains on track” as “frosty Canadian air advances across the U.S. and holds for most of Nov 12-20 with lows of -10s to 30s across the northern U.S. and 20s to 40s over the southern U.S.,” NatGasWeather said Thursday. “This includes subfreezing air advancing deep into the southern U.S.,” including Texas, “with lows into the 20s and 30s, and even the risk of some snow as far south as the southern Plains.”
Futures Finish Strong
The December Nymex futures contract struggled to maintain momentum during the week, despite the anticipated shots of winter weather.
Tropical Storm Nicole, which crashed into Florida’s Atlantic coast with hurricane force early Thursday, knocked out power for thousands of Floridians and threatened flooding and wind damage throughout the Southeast. In anticipation of the storm, both cash prices and futures fizzled over the two days before its arrival.
But the prompt month finished the week on a high note after the Energy Information Administration (EIA) on Thursday reported a 79 Bcf injection into U.S. natural gas storage for the week ended Nov. 4 and freezing air spread over the nation’s midsection.
To be sure, it was a robust inventory increase relative to recent history and reflected mild weather during the covered week. It also marked the seventh time in the past eight weeks that injections surpassed the five-year average.
But the result came in shy of the 83 Bcf median produced by major polls, and futures rallied in trading after the print crossed trading desks.
The injection dwarfed the prior five-year average injection of 20 Bcf and boosted inventories to 3,580 Bcf. Still, it left stocks 2% below the five-year average, according to EIA.
The increased supplies may soon be put to work as wintry conditions canvass much of the Lower 48 in the week ahead.
“Winter nears and cold weather threatens to blanket markets as we get deeper into November,” Rystad Energy analyst Emily McClain said.
“Nearly all regions, except for the Pacific, are forecast to experience below-normal temperatures” at times in the second half of November, McClain added.
However, she said, the market may need to see a return of Freeport LNG operations this month to maintain momentum in November. The Freeport liquefied natural gas facility, offline since a June fire, had been slated to relaunch this month and begin to draw from domestic supplies to meet export demand.
But it has yet to secure all regulatory approvals and analysts are skeptical about its return to service before December. Should Freeport come back online soon, however, it would coincide with winter demand in the Lower 48 and could provide futures and cash market price support.
“Increased LNG exports with the Freeport LNG facility coming back online will tighten the supply outlook significantly,” McClain said.
Thursday Spot Prices Surge
The natural gas cash market on Thursday looked past Nicole’s temporary impacts on demand and focused instead on coming cold. Prices popped in every region, including the Southeast.
NGI’s Spot Gas National Avg. jumped $1.140 to $4.925.
Florida Gas Zone 3 rallied $1.430 to $4.600.
In addition to colder temperatures, a powerful snowstorm strengthened over the Mountain West and headed for the central United States on Thursday, with blizzard conditions forecast for swaths of the northern Plains, according to AccuWeather meteorologists.
“This will be the first major snowstorm of the season for the northern Plains and the combination of heavy snow, powerful winds and low visibility will result in hazardous travel,” AccuWeather Senior Meteorologist Brian Wimer said.
Markets across the Dakotas were forecast to experience whipping winds and blinding snow Thursday night into Friday, he said, with freezing rain possible in parts of Minnesota. Severe thunderstorms were forecast for large portions of the Midwest, including Nebraska, Iowa and Missouri.
Cooler weather also was in the cards for the southern Plains and Texas. Temperature shifts were expected as far south as Houston, according to Space City Weather meteorologist Eric Berger.
“We will continue a slight downward trend in temperatures until the arrival of a strong cold front on Friday that ushers in much colder air for the weekend, and beyond,” for the Houston area, Berger said Thursday. “It still looks as though inland parts of the area will drop down into the upper 30s by Sunday morning, so this should be our first real taste of what passes for winter-like weather in Houston since March.”