Cash prices for natural gas rose and fell in volatile late summer trading for the week ended September 16, both up and down. As the dust settled at the end of a news-heavy five-day range, spot prices ended up in negative territory.
NGI’s Weekly Spot Gas National Avg. for the September 12-16 period, it fell 19.5 cents to $7,670.
Natural gas hubs in the west led to relegations. SoCal Citygate fell $2,960 to $8,730 while KRGT Del Pool lost $3,035 to $8,280 and El Paso S. Mainline/N. Baja fell $3,230 to $8,460.
The October Nymex futures contract also had an erratic week, eventually settling at $7.764/MMBtu to close Friday’s trading, down 3% from the end of the previous week.
Spot and futures both rallied for the first three sessions of the week, initially helped by strong refrigerated demand and domestic inventory concerns. Then on Wednesday, renewed concerns in the supply chain, sparked by the threat of a railroad workers’ strike, pushed physical prices up 28.0 cents to average over $8. Futures surged above the $9 level on Wednesday, gaining 83.0 cents.
“Disrupted rail freight lines could have disrupted supply chains and cost the US economy an estimated $2 billion per day,” said Eli Rubin, senior analyst at EBW Analytics Group. He said a strike could have cut supplies of coal supplies and boosted demand for natural gas.
“In the energy sector,” Rubin said, “disrupted coal freight transportation may have further weighed on precariously low coal inventories, prompting coal operators to conserve scarce supplies, reduce coal production and increase gas demand from the power sector.”
However, when markets opened Thursday, President Biden had announced a tentative deal to avert a strike, ease concerns over coal supplies and push up gas prices. Thursday’s losses erased the previous day’s gains in both the spot and futures markets the next day.
“If you somehow missed the last two trading sessions, you might think nothing happened at all,” NatGasWeather told clients on Thursday.
Prices for the next day and futures continued to fall on Friday. The robust gains earlier in the trading week were not enough to sustain the weekly gains.
“I think we can expect more volatility mid-season,” Thomas Saal, StoneX Financial Inc.’s senior vice president of energy, told NGI. “The market is trying to get a grip on whether we will have enough supply for the winter now that production has ramped up.”
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Evolving storage scenario
Production surged to 2022 highs in September. The bullish momentum has developed just ahead of an expected cooldown as fall conditions get closer. Markets have started to expect more robust storage injections as a result – another bearish move for prices.
The most recent storage report from the US Energy Information Administration (EIA) further supports these expectations.
The EIA on Thursday printed an injection of 77 Bcf of natural gas into storage for the week ended September 9th. Construction kept inventories below average levels. But analysts at online energy platform Enelyst said this reflects rising production levels, which could help narrow deficits as the market moves into the fall.
Pressure lagged the comparable week of 2021 – 78 Bcf – and the five-year average of 82 Bcf, according to the EIA. But it was a big step up from the previous week when EIA released a 54 bcf injection.
It also increased inventories to 2,771 Bcf, although inventories remained below the five-year average of 3,125 Bcf.
Looking ahead, analysts at Enelyst — and some early Reuters poll reporters — expected a build with the next MSRP printing up to the low 100s, citing the increase in production. If so, it would be just the second triple-digit increase of the current injection season and could set the market on track for pre-winter supplies.
However, given robust global demand and ongoing deficits, inventory concerns have not yet been resolved.
Richard Pratt, an analyst and LNG consultant, said in a report by RBN Energy LLC that demand from Europe for US liquefied natural gas exports is particularly resilient and is expected to remain so during the Russian war in Ukraine — and likely beyond out. Global calls for American shipments continue to provide price support and most likely will continue to do so over the winter. Europe is clamoring for US exports to make up for disrupted Russian gas supplies, he noted.
“The entire global trade in LNG is going through an unprecedented period of change as gas-consuming nations try to cope with the current situation and seek protection from future supply shortages and high prices,” Pratt said.
“Although US exports to Europe are at an all-time high, a significantly larger LNG supply is required and it will take 3-4 years to expand US export infrastructure and upgrade the European gas pipeline network to accommodate the new flows” , added Pratt. “That’s the thinking behind expectations that high LNG prices are likely to persist for several more years.”
Friday Cash Prizes Clunk
Friday’s spot natural gas prices continued to stutter for the second day amid relatively mild weather and expectations of comfortable conditions over the weekend. Spot Gas National Avg. lost 62.5 cents to $7,040 that day.
Chicago Citygate fell 72.5 cents a day to average $6,940. Elsewhere in the central United States, Joliet fell 70.5 cents to $6.915 and Consumers Energy lost 65.5 cents to $7.055.
In the west, Malin lost 72.0 cents to $6,910 and SoCal Border Avg. fell $1.115 to $7.045.
NatGasWeather forecast highs of 60 to 80 for much of the country early next week.
However, the company expects hotter exceptions in the 1990s in Texas and the Southwest, and later in the week the eastern two-thirds of the Lower 48 are expected to warm above normal with highs of 70 to 90.
The west coast could see milder bouts if weather systems arrive with showers and elevations from 60 to below 80, NatGasWeather noted.
Looking ahead to the last week of September, the company added, “The western US will be mild and rainy early and then become very warm as high pressure arrives.” The eastern half of the country “will become very warm early and then comfortable” when Rain and cooler air pour into the region.
“The longer-term pattern favors temperatures near to above normal in most parts of the US in October, implying low demand for this time of year due to a combination of weak heating demand in the northern US and some late-season cooling in the southern US,” said the forecaster.
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