Natural gas futures found fresh footing after the latest government inventory report indicated further progress toward supply/demand balance and a key export facility showed signs of bouncing back from an unplanned interruption.
At A Glance:
- EIA prints 57 Bcf injection
- Export volumes increase
- Mild weather forecast
Coming off a 6.3-cent decline the prior session, the October Nymex gas futures contract on Thursday gained 2.8 cents day/day and settled at $2.708/MMBtu.
NGI’s Spot Gas National Avg. shed 2.0 cents to $2.425.
The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 57 Bcf natural gas into storage for the week ended Sept. 8. The print touched the high end of expectations and easily exceeded median estimates. NGI modeled a 52 Bcf increase for Thursday’s EIA print. Estimates submitted to major surveys coalesced around builds in the high 40s Bcf to low 50s Bcf.
Still, the result was well below historic averages, and the seasonally light build allowed utilities to further winnow down the 2023 storage surplus relative to the five-year average. This, in turn, kept the market on a steady trend toward balance – or least the perception of balance – on the cusp of shoulder season.
EIA reported an increase of 74 Bcf a year earlier and a five-year average addition of 76 Bcf.
To be sure, observers said, more progress is needed. The injection for the latest week lifted inventories to 3,205 Bcf, keeping stocks 203 Bcf above the five-year average.
“We obviously have plenty of gas on hand,” Marex North America LLC’s Steve Blair, senior account executive, told NGI.
The EIA report marked substantial improvement from earlier in the summer when the surplus hovered around 350 Bcf. “We’ve definitely been headed in the right direction,” Blair added.
He said improved LNG volumes could prove another key catalyst, and the market got a heaping dose of encouraging news on the liquefied natural gas front Thursday.
Following several days of interruptions, feed gas nominations to Freeport LNG rose and a vessel appeared to be loading early Thursday, NGI reported, citing Kpler vessel-tracking data.
Nominated feed gas on the Gulf South Pipeline system, the principal supply route for the Freeport facility, reached 599 MMcf/d at midweek, according to NGI analysis of pipeline data from Wood Mackenzie. Utilization of pipeline capacity increased to 33% from 11% the previous day. Flows had declined 76% between Sept. 9 and Monday (Sept. 11) to an average of 320 MMcf/d.
Blair said strong export volumes are likely needed this fall to offset expected weather-driven demand as autumn nears.
The LNG Factor
Strengthening LNG during the Sept. 8 week had bolstered demand and helped to keep the latest injection modest, said analyst Saheed Olayiwola of Refinitiv.
Feed gas volumes averaged 13.2 Bcf/d during the covered week – prior to the conspicuous Freeport issues – and this was higher than 12.5 Bcf/d the prior week and 11.2 Bcf/d a year earlier, Olayiwola said on the online energy platform Enelyst.
Overall, Olayiwola estimated that total demand for the Sept. 8 week was 1% higher than the prior 10-year average, reflecting in part robust electricity loads amid a late-summer heatwave across swaths of the central and eastern United States. Still, it was 5% lower than the total for the previous week, when scorching heat was even more pervasive, supporting the argument that strong LNG volumes will be needed to offset cooling fall weather.
Production, meanwhile, was essentially flat during the first full week of September – around the 102 Bcf/d level. “Production is still very strong,” Olayiwola said, and it is a big reason that the storage surplus emerged earlier this year.
Output was interrupted earlier this week by maintenance events, falling below 100 Bcf/d, but it recovered and held above the century mark in estimates Thursday.
For the latest storage report, the Midwest posted the biggest injection — 27 Bcf. The East printed a 9 Bcf increase, followed by the Pacific’s 8 Bcf build and the Mountain region’s 7 Bcf increase. The South Central reported an injection of 6 Bcf.
Looking ahead to next week, analysts are generally expecting a bullish result relative to recent averages.
Early injection estimates for the week ending Sept. 15 submitted to Reuters ranged from 40 Bcf to 79 Bcf, with an average of 69 Bcf. That compares with an increase of 99 Bcf a year earlier and a five-year average of 84 Bcf.
Spot Prices Slip
Next-day cash prices varied by region, but the national average was dragged lower by losses on both the East and West coasts.
National Weather Service (NWS) data showed mild temperatures across a vast swath of the North on Thursday, with forecasts showing highs in the 70s enduring through the weekend from the Upper Midwest through the Great Lakes. Highs were expected to climb into the 80s next week, according to NWS, though conditions were projected to remain benign from a natural gas price perspective.
Aside from the deserts of Arizona and neighboring states, temperatures also cooled in the West and prices followed suit.
SoCal Border Avg. lost 12.0 cents to $3.280, while Malin in the Northwest fell 21.0 cents to $2.695 and Northwest Wyoming Pool in the Rockies dropped 23.5 cents to $2.585.
The Northeast, meanwhile, saw similarly mild conditions Thursday, and parts of the region could see additional cool shots as Hurricane Lee nears.
Lee was more than 200 miles southwest of Bermuda and traveling north Thursday, the National Hurricane Center said. The storm was on track to approach New England and Atlantic Canada Friday and Saturday, the forecaster said.
Accuweather’s Alex Sosnowski, senior meteorologist, said the “large hurricane made a critical turn to the north over the Atlantic on Wednesday night” and was likely to deliver “high winds, heavy rain and coastal flooding this weekend” to the Northeast. This could further diminish cooling demand and potentially cause power outages.
“Swells radiating outward from Lee will approach the upper mid-Atlantic and southern coast of New England into the end of the week and will lead to building seas and surf,” Sosnowski said.
In the Northeast Thursday, Niagara fell 17.0 cents to $1.540, and PNGTS shed 7.5 cents to $2.400.
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