Weekly Spot Natural Gas Prices Sizzle Despite Nor’easter; Flail Futures

Weekly cash natural gas prices lost ground despite brief bouts of wintry weather and stronger heating demand in parts of the central and eastern United States. This was offset by mild temperatures elsewhere and robust production that ended up holding back physical markets as well as futures.

NGI’s Weekly Spot Gas National avg. for February Period 12-16 fell 18.0 cents to $1,785.

When the business week closed, Permian El Paso in West Texas fell 13.5 cents to 93.5 cents, while Consumer energy in the Midwest fell 18.0 cents to $1,605 a El Paso San Juan in the Rockies, it fell 37.0 cents to $1,640.

March Nymex natural gas contract have slumped for most of the week, as forecasts indicated milder weather and supplies remained plentiful. According to Wood Mackenzie, production held around 105 Bcf/d during the past week, within reach of record levels just above 107 Bcf/d.

Spot month settled at $1.609/MMBtu to close the trading week on Friday, up 2.8 cents on the day but down 13% from the previous week’s close. Friday marked the only advance of the week and the first of nine sessions.

“There really doesn’t seem to be any catalyst for this market,” Steve Blair of Paragon Global Markets LLC, managing director of institutional energy sales, told NGI, absent production curbs or a sudden change in weather.

Around the middle of the week, a wild Nor’easter swept into densely populated areas of the East, bringing cold air and sparking a new round of demand. Snow also covered parts of the central part of the country.

“Just days after near-record warming in some areas, the storm that brought accumulating snow to the southern Plains and parts of the Mississippi Valley on Monday” “caused a sudden change in the weather pattern, bringing accumulating snow and disrupting travel from the upper mid-Atlantic to across southern New England,” said Alex Sosnowski, AccuWeather Senior Meteorologist.

But such weather quickly faded away, replaced by seasonally favorable air and pleasant temperatures, which maintained bearish pressure on prices. Another blast of Nordic cold was in the cards for President’s Day weekend. Overall, however, conditions were mild throughout most of the lower 48 during the week.

“Weak fundamentals prevailed and above-normal winter weather took center stage, curbing demand in a crowded market,” said analyst Jack Weixel of East Daley Analytics.

“Natural gas prices have fallen below $2/MMBtu by spring 2024 as mild temperatures and steady production growth create trading conditions throughout the month,” Weixel added.

Futures Flop

Futures struggled during the week – as they have most of the winter – largely due to strong production which, coupled with favorable weather for most of the season, has led to low stocks in warehouses.

The US Energy Information Administration (EIA) on Thursday printed a warehouse selection 49 Bcf for the week ending in February. 9. Both polls and NGI estimates missed expectations for high 60s Bcf pull.

It was also well below the five-year draw average of 149 Bcf. The EIA recorded a draw of 117 Bcf a year earlier.

Analysts Gelber & Associates said: “Given the error and its confluence with already bearish market sentiment,” EIA’s press release on Thursday extended the immediate monthly losses.

With favorable weather conditions and stronger wind generation, South Central provided an injection of 20 Bcf. That partially offset East and Midwest regional withdrawals of 32 Bcf and 27 Bcf, respectively, according to the EIA. Pacific region inventories fell by 6 Bcf, while Mountain inventories fell by 5 Bcf.

The overall decline over the last period of the EIA report reduced inventories to 2,535 Bcf, but inventories remained well above the prior year’s level of 2,280 Bcf and the five-year average of 2,187 Bcf.

“Given the weak fundamentals, we believe there is a risk that inventories will end (in winter) above 1,900 Bcf and further depress prices during the 2024 season,” Weixel said.

Looking ahead next week, analysts generally expect another slight decline. Preliminary estimates for the week ending in February. The 16 presented to Reuters ranged from withdrawals of 62 Bcf to 98 Bcf. The five-year average drawdown is 168 Bcf.

Friday cash prizes

Spot natural gas prices surged in much of the country during Friday trading, covering supplies from Saturday to Tuesday, thanks to the holiday weekend. NGI Spot Gas National Avg. dropped half a cent to $1,595.

But centers in Appalachia and the Northeast bucked the overall trend.

Algonquin City Gate near Boston rose 59.0 cents day/day to average $2,915, while Transco Zone 6 NY gained 29.5 cents to $1,675.

Weather data showed freezing temperatures moving into northern parts of the Plains and Midwest as well as the Northeast Friday and into the weekend.

But the cold was not expected to last.

Maxar’s Weather Desk said Friday’s models showed mostly warmer temperatures for most of the lower 48 over the six- to 10-day and 11- to 15-day projection periods.

For next week until February. 25, the forecaster called for “abnormally warm” temperatures that would include highs in the 50s for Chicago and upper 70s to low 80s for Texas. The eastern half of the Lower 48 could then experience a “brief” cooling before “strengthening Pacific flow quickly returns over and much higher into the Plains and Midwest at the end of the period.”

In its February 26-March 1 Outlook, Maxar projected “an intensified pattern as the trough settles southward along the west coast.” That could lead to cooler and wetter conditions along the West Coast, according to the forecaster. But the eastern two-thirds of the Lower 48 could see warmer-than-normal temperatures.

Against this setup, spot prices fell in most regions on Friday. Chicago City Gate lost 4.5 cents to $1,460 and in the West Northwestern Sumas fell 19.0 cents to $1,755.

Regarding pipelines, Wood Mackenzie analyst Kevin Ong noted that El Paso Natural Gas declared force majeure on its 1903 line due to an equipment failure. This limited supplies flowing through the Mojave Pipeline Company, which delivers gas through Arizona to California.

However, prices in Southwest and Southern California have been falling due to declining demand. SoCal City Gatefor one, down 40.0 cents to $2,065.

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