Spot natural gas prices were mixed for the April 25-28 trading period as post-season cold weather in parts of the country combined with demand for air conditioning in the south. NGI’s Weekly Spot Gas National Avg. eventually slipped 6.0 cents to $6.725/MMBtu.
Nymex futures, meanwhile, moved sharply higher as snowstorm conditions slamming the Rockies curtailed production at a time when the gas market was looking for more supply.
Pipeline maintenance also dampened production, sending the May contract off the shelf at $7.267. June futures, meanwhile, hit a weekly high of $7.422 before ending Friday’s session at $7.244.
Despite the calendar approaching May, the harsh winter weather shocked traders, who returned to their desks after the weekend. Pipelines in the region had warned of possible impacts ahead of the cold front, but actual disruption began on Sunday.
Wood Mackenzie pointed out that the Williston Basin Pipeline (WBI) triggered force majeure due to weather conditions. Additional restrictions developed Monday and by Thursday WBI had declared a force majeure at Williston Compressor Station.
The Pipeline reported that it has been experiencing issues with its third-party electricity provider since the snowstorm, and the Williston station will remain offline until further notice. WBI does not have an estimated recovery time.
“The force majeure will reduce the maximum outlet capacity on line section 30 (West) to approximately 60,000 MMBtu/d until repairs are complete,” said Kara Ozgen, an analyst at Wood Mackenzie. “Additionally, operations at the Tioga processing facility in Williams, ND have not yet returned.”
Wood Mackenzie said Rockies volumes were down about 235 MMcf/d through Tuesday.
The Northern Border Pipeline, meanwhile, issued a Low Line Pressure Operational Flow Order (OFO) from Port Morgan, MT to Glen Ullin, ND, effective Sunday through May 2.
Production resumed later in the week. Bloomberg reported Friday that 80% of the natural gas and oil supplies lost to North Dakota’s snowstorm are expected to be recovered over the weekend. Returning the remaining volume may take at least a week due to damage to electrical infrastructure and difficulties in accessing more remote locations.
On the price front, Northwest Pipeline Wyoming Pool spot gas was down 14.5 cents on the week to average $6,620, while Ventura was up 5.0 cents to average $6,750.
Production also fell in other areas of the country as pipeline maintenance was underway, slowing gas flow. Texas production was down about 280 MMcfd as of Tuesday, while Midcontinent production fell about 175 MMcf/d.
OGT cash rose 8.5 cents week-over-week to average $6,440, but Panhandle Eastern slipped 7.0 cents to $6,500. In Texas, Waha was down 6.5 cents at $6.345 and Houston Ship Channel was down 8.0 cents at $6.610.
However, prices in the North East were stronger given the persistent cold in that part of the country. Huge fluctuations have been seen throughout the period, with PNGTS cash up an average of 79.0 cents on the week to $8,150.
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Futures fireworks
Futures action, meanwhile, remained volatile amid Russia’s escalating war with Ukraine. The Kremlin this week halted gas supplies to Poland and Bulgaria for failing to meet Russia’s demands for a new payment method. Although halting gas supplies to the two countries was not expected to severely affect balance sheets, the move increased concerns about more shutdowns to come.
Gazprom PJSC said Thursday it expects natural gas production to fall 4% this year to 494.4 billion cubic meters as European customers scale back imports from Russia after the country’s invasion of Ukraine.
As Europe aggressively tries to wean itself off Russian supplies, calls for US exports of liquefied natural gas are expected to remain strong in the years to come. Commercial talks for as yet unsanctioned LNG export projects have been robust after the conflict. Meanwhile, the Department of Energy this week approved an additional 500 MMcf/d LNG exports from two Gulf Coast projects.
Golden Pass, which is scheduled to begin exporting in 2024, received approval to increase capacity from 15.6 million tonnes per year to 18.1 million tonnes per year (mmty). The Golden Pass project, an ExxonMobil and Qatar Energy project currently under construction southeast of Houston, could be the largest U.S. capacity expansion in the near future.
Exports from the proposed Magnolia LNG project have increased from 8 million to 8.8 million per year. Magnolia, pending approval, is designed as a four-train facility to be built by Glenfarne Group LLC in Lake Charles, LA.
memory clock
With LNG feed gas demand expected to be near maximum capacity this summer, the market has been jittery as domestic inventories are poised to fall below reasonable levels by winter.
The Energy Information Administration (EIA) on Thursday reported a 40 Bcf increase in inventories for the week ended April 22nd. The double-digit increase was in line with expectations but increased the deficit to the five-year average at 305 Bcf.
By region, South Central continued to lead injections and increased stocks by a net 31 Bcf, according to the EIA. This included an 18 Bcf build in non-salt plants and 14 Bcf in salts. Midwest inventories rose 5 Bcf while Pacific stocks rose 2 Bcf. The mountainous region added just 1 bcf while the east week/week was flat.
Total stored working gas was 1,490 Bcf as of April 22, down 406 Bcf from the same point last year and 305 Bcf below the five-year average, EIA said.
Analyzing the latest inventory report, the Schork group noted that after a slow start to the traditional injection season, the EIA has now reported solid builds in a row. Over the past three weeks, shares have increased by a total of 108 Bcf, up 15% from the seasonally adjusted trend, it said.
“However, due to the slow start, shares are 22% below the corresponding week a year ago and about 17% below the five-year average,” added Schork analysts.
Looking ahead to the summer, Mobius Risk Group said cumulative storage build was a substantial 350 Bcf last June. In fact, there were two reporting periods with builds above the century mark.
“June 2022 and price action at the top of the curve is likely being measured relative to last year’s 350 build,” said Zane Curry, an analyst at Mobius. Price action may also be determined by whether there are consecutive injections in excess of 100 Bcf at any point before cooling demand begins in earnest at the end of the month.
“The $7.00 and $5.00 levels for Balance of 2022 and calendar year 23 will likely be key levels to watch over the next few weeks as seasonal demand eases,” Curry said .
Mixed cash prizes
Spot gas — traded Friday against Sunday and Monday gas delivery — rose Friday in the Midwest and parts of the East. This was compounded by what NatGasWeather described as a cool late season weather system that brought showers and thunderstorms to markets across the North.
Conditions, including overnight lows from the 20’s to 40’s, were expected to persist over the weekend and stimulate relatively strong heating demand for late April/early May.
“Increasing chilly shots will sweep across the Midwest and East in the coming trading week,” with lows in some areas in the 30s, NatGasWeather said.
The company added that heat is expected to spread further in the southwest, creating areas with solid cooling needs. On Friday, however, conditions in the country’s southern reaches were mostly comfortable, offsetting demand in northern markets.
In the Midwest, Chicago Citygate was up 13.0 cents day/day to average $6.755 and Emerson was up 17.5 cents to $6.370.
To the east, Columbia Gas was up 9.5 cents to $6.325.
However, prices remained unchanged or slightly lower in most southern markets. The biggest declines were in Texas, where El Paso Permian lost 17.5 cents to $6,150 and Katy 13.5 cents to $6,520.
According to NatGasWeater, forecasts for the first half of May showed enough heating demand in the far north and enough cooling demand in the south to likely prevent large storage injections. This, the company added, would keep the storage deficits of high interest and “keep the background state relatively optimistic” ahead of expectations of a summer that will usher in “intimidating” heat.
Most major cities in the Northeast and Midwest, from Boston to Chicago, experienced more 90-degree days than normal this past summer, AccuWeather said in a report Friday. The company’s forecasters expect a repeat next summer, showing the potential for increased cooling demand in these key natural gas consuming regions.
AccuWeather is also forecasting above-average rainfall in the Midwest and Northeast. High humidity increases the likelihood of violent storms from the Atlantic coast through the Great Lakes, the firm added. “We may have a lot of severe weather to contend with,” said AccuWeather Meteorologist Paul Pastelok.
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