December’s natural gas futures ended the tough week on a sour note; Cash advances


Progress has been short-lived for natural gas futures, as prices collapsed on Friday amid uncertain weather demand, high production and renewed Russian pledges to increase supplies in Europe, a key destination for US exports.

In one look :

  • Futures fail to maintain momentum
  • Demand outlook remains uncertain
  • Spot prices get a weekend boost

The December Nymex contract fell 35.8 cents day / day to settle at $ 4.791 / MMBtu. The month of January fell 36.5 cents to $ 4.880 on Friday. Futures had gained momentum a day earlier – after the losses of the previous three days – only to resume lower to close the week.

Spot Gas National Avg. NGI’s, on the other hand, rose 9.5 cents to $ 4.690 as winter conditions hit the Midwest and are expected to push east over the weekend, fueling demand for heat.

Bespoke Weather Services said that as the Northern Plains and Great Lakes were swamped with freezing temperatures, high winds and sporadic weekend snow showers, the outlook for much of the Lower 48 until November did not impress futures traders.

“This has been the theme for quite some time now, as the model refuses to show much deviation from normal,” Bespoke said. The forecast “just bounces with slightly warmer and colder spells in all regions, from the plains to the east…” less importance for natural gas markets.

At “this time of year,” the company added, “it’s mostly a game of weather forecasting, which keeps our confidence on the low side in terms of guessing where the market will go in the near term. “

US production, meanwhile, has averaged over 95 Gcf / d over the past week, according to Bloomberg estimates. That’s an increase of about 3 billion cubic feet per day from fall lows, adding pressure on prices.

“The resumption of dry gas production over the past three weeks has been the main catalyst for the weather-normalized market, with significantly higher supply raising the projected storage trajectory and reducing the risk of extreme price spikes in winter.” , EBW Analytics Group said Friday.

Ahead of Thursday’s Energy Information Administration (EIA) storage report, analysts at Tudor, Pickering, Holt & Co. (TPH) said they were anticipating an end-of-season injection, suggesting a drop in demand in recent days. In an average year, the withdrawal season begins in mid-November.

TPH analysts said electricity demand and residential / commercial demand were declining on a week-to-week basis, with the latter falling about 5 billion cubic feet / day behind five-year average levels Friday – a “key driver in our looser modeled balances” for the next EIA print. .

EIA reported a net injection of 7 Bcf into U.S. gas inventories for the week ending November 5.

US exports of liquefied natural gas (LNG), meanwhile, topped 12 billion cubic feet at one point earlier this month and held steady at nearly 11 billion cubic feet on Friday, providing a driver of demand. stable. Demand from Europe, where gas supplies are low while winter is expected to set in during the second half of November, propels high volumes of LNG in the United States.

However, despite a migration crisis and political turmoil affecting countries between Russia and the heart of Europe that could lead to pipeline disruptions, Russia last week reiterated its commitment to step up deliveries and help the Europe to face gas shortages this winter.

“Russia is committed to supplying gas to Europe despite the chaos,” raising the specter of reduced demand for US LNG, said Robert Yawger, director of energy futures at Mizuho Securities USA LLC.

Cash Climb

Despite all the headwinds facing the futures market, spot prices advanced on Friday amid an explosion of winter weather conditions over the weekend.

NatGasWeather noted that comfortable highs of 50 to 80 permeated the southern and eastern expanses of Lower 48 on Friday. However, winter conditions that swept through the upper parts of the middle part of the country have spread eastward and are expected to result in freezing depressions in parts of the densely populated east coast.

That was enough to get the ovens going, NatGasWeather said, propelling spot prices, especially in the East.

At the close of trading on Friday, Cove Point was up 37.0 cents day / day to an average of $ 4.800, while Columbia Gas was ahead 37.0 cents to $ 4.455 and Millennium East Pool was in. up 57.5 cents to $ 4.390.

Physical prices in the West were the exception that day, with SoCal Citygate falling 88.5 cents to $ 5.090.

Seasonal warm weather is expected to return by the middle of the coming week, NatGasWeather said, and demand could remain weak until the end of November. The firm said forecasts predicted the southern half of the country would experience mild to warm highs of 50 to 70 in the last full week of the month.

On the pipeline side, Tennessee Gas Pipeline said that from Saturday to next Friday (November 19), maintenance work is scheduled on its 299 segment in New York. This should reduce the operational capacity of the line from 827,000 MMBtu / d to 239,000 MMBtu / d, according to Wood Mackenzie analyst Kara Ozgen.

The affected line carries supplies from northeastern Pennsylvania via upstate New York to New England. “If temperatures get cooler during this time in the northeast, we could see an upward movement in prices at Algonquin Citygate,” Ozgen said.

Algonquin Citygate prices jumped 95.5 cents to $ 5.170 on Friday.

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