Natural gas futures snapped long losses despite high output; Spot price rally

Natural gas futures ended in positive territory for the first time in nine sessions on Monday, boosted by expectations of wintry weather in the north this week and the potential for more heating demand next month.

Nymex November gas futures fell 17% on Monday amid a period of recent malaise, gaining 2.7 cents day-to-day to settle at $2.926/MMBtu. December rose 1.5 cents to $3,273.

Point gas NGI National avg. advanced 5.5 cents to $2,045.

While favorable conditions are still expected for much of the lower 48 this week, the forecast had a cooler trend heading into the weekend, NatGasWeather said. This was mainly due to a weather system that will “drop out of Canada into the Rockies and Northern Plains with lows in the low 10s to 30s” later in the week, increasing heating demand.

The system should deliver “stronger national demand” including “the first decent frost of the season,” the firm said. However, “the pattern would be more impressive if not for much of the weather data favoring near-warmer-than-normal temperatures returning across much of the U.S. Nov. 3-6” ahead of the possibility of a more widespread cold snap late next month.

Meanwhile, LNG supply demand reached 13.6 Bcf/d on Monday, close to recent highs of around 14 Bcf/d, Wood Mackenzie data showed. The firm estimates energy burn at 31.9 Bcf/d, up slightly from the recent seven-day average of 30.1 Bcf/d.

The demand drivers were enough to pull futures out of a sharp slump that was largely fueled by concerns about robust production and oversupply.

Domestic output remained high on Monday and averaged 103.5 Bcf/d over the weekend, including volumes of 103.7 Bcf/d on Sunday and touching all-time highs, according to Wood Mackenzie estimates. The firm estimated production of 103.0 Bcf/d for Monday.

“Production was again at a record high over the weekend as Marcellus rigs ramped up output during the short-term cooler temperatures. The production increase is a worrisome development for bulls, who are already connecting with cold weather to support gas prices,” Eli Rubin, principal analyst at EBW Analytics Group, said on Monday.

Rubin noted that the latest Baker Hughes Co. The number of natural gas drilling rigs increased by one“including the surprise rise of three platforms in the bellwether Haynesville Shale as the sharp upstream momentum from the earlier injection period began to moderate. While the number of rigs producing gas has fallen by 43 (-27%) since April, declines have leveled off over the past 10 weeks as producers look to maintain capacity through the winter and ahead of an expected boom in LNG demand. “in the second half of next year and beyond.”

New LNG facilities are expected to open along the Gulf Coast in 2024 and beyond to meet expected strong global demand for the next few years.

“In the interim, increased gas production could further weigh on a crowded market without a very cold winter — further distorting medium-term Nymex natural gas price risks through the end of the calendar year,” Rubin said.

Looking ahead to the next U.S. Energy Information Administration (EIA) storage report, covering the week ending Oct. 20, analysts are looking for a seasonally strong print. Preliminary estimates provided to Reuters ranged from injections of 59 Bcf to 86 Bcf, with an average increase of 73 Bcf. NGI has modeled an assemblage of 79 Bcf. That compares with an injection of 61 Bcf a year earlier and a five-year average of 66 Bcf.

The latest EIA report injecting 97 Bcf into the stockpile for the week ending October 13. This increase was driven by a surge in inventory in South Central along with steady gains in the Midwest and East.

Ahead of the report, analysts’ median estimates had settled around an increase of about 80 Bcf. The result easily eclipsed recent norms — a five-year average increase of 85 Bcf — and further beat futures late last week.

The latest injection boosted inventories to 3,626 Bcf, keeping inventories well above the prior-year level of 3,326 Bcf and the five-year average of 3,451 Bcf.

Cash prices are rising

Spot gas prices rose on Monday, supported by gains in the Rocky Mountains and the Northwest.

Stanfield rose 71.0 cents to average $2,540 as of Friday, while elsewhere in the Mountain West, Opal climbed 71.5 cents to $2,515 and KRGT Rec Pool rose 70.5 cents to $2,510.

at North-West, Smart gained 64.0 cents on $2,555 a Northwestern Sumas jumped 84.5 cents to $2,560.

NatGasWeather said mild conditions will dominate much of the Lower 48 this week, although a cold shot across northern parts of the country has caught traders’ attention.

A “warm high pressure area will strengthen over the southern and eastern” parts of the country, with highs in the 60s-70s over the Great Lakes and Northeast and highs in the 70s-80s over much of the South, the firm said. “The west will be mild as weather systems move through with showers and highs in the 50-70s, including showers in the southwest into Texas due to the remnants of a tropical system.”

All told, the cold conditions expected up north could prove significant, driving demand and presenting the possibility of a production freeze in the Rockies later this week.

“The first widespread snowfall of the season is coming to parts of the Rockies and Northern Plains this week, and is expected to bring all the trappings of winter from heavy snow to gusty winds to freezing temperatures,” AccuWeather senior forecaster Bill Deger said. meteorologist.

Deger said the storm “is expected to develop in waves Monday through Friday and affect more than a half-dozen states” across the Rockies, parts of the Pacific Northwest and the western Dakotas.

“The snow and cold will represent a dramatic change in the weather pattern across the region compared to last week when dry, near-record warm conditions were the norm,” Deger said.

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