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Natural gas prices hovered in a narrow range of modest gains and losses Friday before ultimately finishing in positive territory, as traders assessed cooler near-term weather patterns and mounting production against lingering storage deficits.
The October Nymex gas futures contract settled at $7.996/MMBtu, up 8.1 cents day/day. It marked a second consecutive advance. November rose 7.3 cents to $8.044 on Friday.
NGI’s Spot Gas National Avg. fell 37.5 cents to $7.435, extending a weeklong trend of losses against the backdrop of looming fall weather.
Marex North America LLC’s Steve Blair, senior account executive, told NGI that futures got a boost over the final two days of the trading week from the latest federal inventory data.
“We got a little reminder that, even though it’s a ways off, we could face the coming winter with relatively light gas in storage,” Blair said.
The U.S. Energy Information Administration (EIA) reported an injection of 54 Bcf natural gas into storage for the week ended Sept. 2.
The result came in lower than five-year average build of 65 Bcf and left stocks below historic norms.
Working gas in storage rose to 2,694 Bcf, but stocks were 222 Bcf lower than a year earlier and 349 Bcf below the five-year average.
Still, gains late in the week were modest, and Friday’s action culminated another down week for natural gas futures. Bears mauled markets on both Tuesday and Wednesday, and futures declined a third straight week on rising production and forecasts for benign autumn weather.
Exploration and production companies ramped up output in August and early September, responding to price incentives amid a summer defined by searing heat and steady cooling demand. Production topped 100 Bcf/d at points during the past week and hovered around 99 Bcf/d on Friday, according to Bloomberg estimates.
At the same time, NatGasWeather said demand is expected to ease in the week ahead as a heat wave punishing California and the Mountain West finally subsides.
“National demand is expected to be light” in mid-September “as a series of weather systems track across much of the U.S., resulting in comfortable highs of 60s to 80s besides locally hotter 90s over Texas, Florida and Southwest deserts,” NatGasWeather said.
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Against that backdrop, Blair said, futures may struggle to sustain momentum in September.
“In the near term, we’re headed toward milder fall weather and air conditioner usage is really going to start to go by the wayside,” he said. “The higher production, too, has a lot to do with the market moving lower over the past few weeks…Overall, I think we could move a bit lower from here as we head into the shoulder season.”
EBW Analytics Group’s Eli Rubin, senior analyst, agreed.
“While the nascent bounce off of technical support may probe higher in the immediate term, a softening near-term fundamental outlook suggests another retest near this week’s intraday lows of $7.75-7.95 is favored over the next seven-10 days,” Rubin said Friday.
On the bulls’ side, however, is lingering heat and weak wind generation in Texas, he said.
The Electric Reliability Council of Texas reported that wind generation “continued to struggle mightily” over the past week – extending a trend to six weeks, Rubin said. With average wind production in September down 58% as of Friday, compared with the same month in 2021, “the resulting call on natural gas burns has lifted demand nearly 1.0 Bcf/d.”
That noted, wind is forecast to pick up this autumn and “could add to seasonal weakening” in power sector gas burns, Rubin said. This “may open the opportunity for notable declines in the storage deficit this fall.”
Spot gas prices sputtered on Friday for the fourth time in as many days as a pending reprieve from summer heat neared.
NatGasWeather said Friday the northern and eastern portions of the Lower 48 would cool over the weekend and see mild conditions through the week ahead. Additionally, the outer bands of Hurricane Kay in the Pacific were expected to bring rains and lower temperatures to the West Coast.
After enduring triple-digit highs for nearly two weeks, the firm said, seasonal highs in the 80s will return to California. Parts of the South could see similar highs, as well.
Looking to the second half of September, the northern half of the country could see “mostly comfortable highs of mid-70s and 80s,” with “only modest coverage of highs into the 90s over the southern U.S. for relatively light national demand,” NatGasWeather said.
With that bearish forecast as a foundation, prices on Friday declined in every region of the Lower 48.
Waha in Texas shed 32.0 cents day/day to average $6.595, while Chicago Citygate lost 11.0 cents to $7.380 and Florida Gas Zone 3 dropped 13.5 cents to $8.880.
Out West, meanwhile, prices plunged from their recent lofty highs. KRGT Del Pool fell $3.880 to $7.770 and SoCal Border Avg. lost $3.075 to $8.255.
Further out, the National Oceanic and Atmospheric Administration (NOAA) released an updated outlook Thursday that predicted a 91% chance the current La Niña pattern would influence weather conditions through the fall and a 54% chance through the coming winter. NOAA cited cooler-than-average water in the east-central Pacific and long-range climate models.
If a La Niña winter develops, it would mark the third straight year. During such winters, the southern half of the country tends to be warmer, while the northern half is often colder than normal. That would bode well for natural gas consumption in markets throughout the Upper Midwest and Northeast.
La Niña patterns also often worsen droughts in California and the Southwest. This would diminish hydropower and, potentially, increase calls for natural gas in those regions.
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Weekly natural gas cash prices gave up substantial ground amid rising production and near-term forecasts for mild temperatures across much of the Lower 48. NGI’s Weekly Spot Gas National Avg. for the Sept. 6-9 period dropped $1.010 to $7.865/MMBtu. Cash prices fell each of the holiday trading week’s four sessions. The period was abbreviated because…
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