Natural gas forward prices slide amid weaker balance sheets, but Appalachian base strengthens

The easing of balances, evidenced by a weekly inventory buildup that topped major surveys, accompanied declines in forward prices for most of the 48 Low Countries during the August 12-18 trading period. Looking to the future of NGI data sample.

Nymex September futures saw up and down action, but overall lost ground during the August 12-18 period, including a strong sell-off of 10.9 cents on Tuesday (August 17).

A September 8.1 cent decrease from Henry Hub coincided with fixed-price month-ahead discounts at most hubs in the Netherlands 48 during the period.

[Need natural gas forward curves? NGI offers 70 curves by month going out 10 years (120 data points per curve) as fixed price or basis differentials to the Henry Hub. Learn more.]

Meanwhile, forward contracts at hubs in the West and in the Appalachians saw both fixed price gains and a strengthening of the base as they bucked the broader downtrend in the market.

Post-storage bounce

Nymex futures initially appeared on the verge of adding to recent losses on Thursday. However, the September contract ignored the bearish impact of a 46 Bcf net weekly injection into US gas stocks reported by the Energy Information Administration (EIA).

Printing, reflecting changes during the week ending August 13, was above the upper limit of the survey ranges. Still, the price action suggested that the construction did not take traders by surprise. At least the buyers seemed satisfied that the pre-report discounts had been enough to account for the larger print.

Shortly after the EIA data crossed the trading screens, September hovered around $ 3,750. A steady rise from there saw the first month end again at $ 3,830, down 2.2 cents a day, but a far cry from the lows.

The print included a base gas reclassification resulting in a 4 Bcf increase to working gas at the South Central non-saline facility. According to Bespoke Weather Services, that put the “real” implicit weekly flow at plus 42 Bcf.

“This is the weakest number in a long time and explains much of the recent sales, although we see the next two numbers coming much closer to this number, although not as close as some of the numbers seen in recent weeks. ”Bespoke said shortly after the EIA report was released.

Technical support for Nymex’s point month contract was challenged on Thursday, with prices falling as low as $ 3,734, but eventually held.

Heading into Thursday’s session, ICAP technical analysis had set support targets at $ 3,784 and $ 3,715-3,681.

Support at these levels “must be broken to make the case for a more significant top rather than another minor bull market correction,” ICAP analyst Brian LaRose told clients in a note. “I suspect that if we are to have any chance of seeing such a high development,” the Asian and European natural gas benchmarks “will have to be revamped as well. The bears have no case otherwise.”

For the week ending August 13, Energy Aspects analysts said they observed a sequence of days during which natural gas saw its share of thermal generation drop below 60%, even amid the peak load of the summer 2021 nationwide.

“Although price may have played some role in the decline in gas, the wind generation that reached its highest level since the end of June inversely underscores the role that low performance in renewables can play in keeping gas generation high, even at high gas prices, “Energy Aspects said in a recent research note. “However, our expectation is that the gas can return the thermal share to coal in the intermediate season once the general load normalizes.

“These days of thermal involvement of the weaker gas (if only marginally weaker) give us confidence that the price will be able to pull back some energy when September weather is milder.”

SoCal peaks

Price centers in the West, especially Southern California, saw the largest base movements during the August 12-18 trading period. SoCal Citygate’s previous month’s base increased by $ 1,140 more to more than $ 3,294, while SoCal Border Prom. Jumped from more than 60.4 cents to more than $ 1,403.

Spot market prices earlier in the week were hit by a fatal pipe explosion in the El Paso Natural Gas (EPNG) system.

Kinder Morgan Inc. said a segment of the EPNG system near Coolidge, AZ, experienced a pipeline failure and subsequent fire on Line 2000 early Sunday (August 15). Two people were killed in the explosion and another was injured.

Upstream of the EPNG fault, the base of the Permian Basin weakened during the period. El Paso Permian’s prior month base widened 3.9 cents to minus 28.1 cents from Aug 12-18, while Waha’s September base similarly widened 3.9 cents to trade 29.1 pennies behind Henry Hub.

Appy Basis Shrinks

Meanwhile, centers across the Northeast and Appalachia posted notable baseline gains of about a dime or more during the Aug. 12-18 period.

Expectations of cooling demand for population centers on the East Coast may have helped stimulate buying interest. Maxar’s Weather Desk as of Thursday showed a stretch of mostly above-normal temperatures covering the Interstate 95 corridor from Washington, DC, to Boston through the end of this month.

Transco’s Zone 5 base rallied 11.5 cents for the period, rising to more than 44.9 cents. Upstream in Appalachia, Eastern Gas South, prices for the immediate month closed the gap with Henry at 10.5 cents, going from minus $ 1,021 to minus 91.6 cents.

When viewed in terms of year-to-year change, balances in the Appalachian region have narrowed this month compared to early summer, according to a research note published Wednesday by RBN Energy LLC.

“To date, estimates of the balance of supply and demand indicate that the market is much less bearish compared to last year in August than in July or previous months,” RBN analysts said in a report to clients on the Appalachian basics. “In July, the market had a surplus of 2.5 Bcf / d versus July 2020. In August to date, that year-on-year surplus dropped to 0.9 Bcf / d, which is also the tightest balance we have had so far. injection season “.

RBN analysts noted that energy production and consumption are contributing factors to tighter balances. The company estimated 34.3 Bcf / d of production to date, up from 34 Bcf / d in July, with July 2020 closings resulting in a tighter year-to-year supply increase so far this month.

This is because regional demand for LNG exports for energy, residential / commercial, industrial, and Cove Point remained stable year-on-year during the first 17 days of August; July demand fell to previous year’s levels at 1.8 Bcf / d, according to RBN estimates.

Leave a Comment