Despite strong demand, weekly natural gas prices dragged down by LNG crash

Weekly spot prices lost ground despite modest production and strong cooling demand across much of the lower 48s fueling several daily gains.

Weekly National Average of NGI Spot Gas. for the June 13-17 period fell 94.5 cents to $7.565, dragged lower by an outsized loss on Tuesday related to broader natural gas market sentiment suddenly deteriorating.

Spot prices on the day fell $1,370 following news that the liquefied natural gas (LNG) export project on the island of Quintana, TX, Freeport LNG, will not see a return. to full service before the end of this year. The facility suffered a fire on June 8 and its extended recovery likely means gas once destined for export will be injected into U.S. storage, easing supply issues that had supported prices much of the spring.

On the same Tuesday, the July Nymex contract plunged $1.420 – its third biggest drop on record. The fast month ended Friday at $6.944/MMBtu, down 52.0 cents day/day and 21.5% below the previous week’s close.

Notable weekly cash declines included El Paso Permian, down $1,030 to $7,095, Chicago Citygate, down $1,100 to $7,470, and Enable East, down $1,035 to $7,335.

Despite the weekly decline, spot prices have advanced in three of five sessions over the past week, and analysts expect demand to remain flat through June amid forecasts of widespread heat.

“Mother Nature could drive prices up,” Tom Saal, senior vice president of energy at StoneX Financial Inc., told NGI. “It’s going to be very hot and modest production remains an issue.”

Production has hovered around a lackluster 94-95 Bcf over the past week.

“In our view, until U.S. production reaches more than 97 billion cubic feet per day, the balance between supply and demand will remain tight,” despite the cushion provided by the facility’s surprise closure. of Freeport LNG, said NatGasWeather.

[Want today’s Henry Hub, Houston Ship Channel and Chicago Citygate prices? Check out NGI’s daily natural gas price snapshot now.]

Volatile Futures Contracts

Between Tuesday’s freefall and Friday’s closing drop, futures rallied on Wednesday amid strong cooling demand and modest production.

The first month advanced again on Thursday after the U.S. Energy Information Administration (EIA) reported an injection of 92 billion cubic feet of natural gas into storage for the week ended June 10.

The injection compared to a five-year average increase of 79 billion cubic feet and boosted inventories to 2.095 billion cubic feet.

Still, inventories remained well below the five-year average of 2.418 billion cubic feet, leaving market participants wondering if the gas released from Freeport – around 2.0 billion cubic feet / d – will be enough to strengthen storage at levels high enough to ensure adequate supply for the next. Winter.

The concern was amplified by forecasts of record-breaking heat in June and above-average high temperatures throughout the summer in the Lower 48.

“Overall, the background condition remains bullish,” NatGasWeather said.

Eli Rubin, principal analyst at EBW Analytics Group, agrees.

“Even despite the shutdown of Freeport LNG’s feed gas demand of 2.0 bcf/d, the combination of soaring power sector gas consumption” – potentially increasing by 4, 2 billion cubic feet/d from the EIA period of June 10 to the first week of July – “and stagnant production growth should maintain a tight supply/demand balance. If and when the current extreme heat subsides, the Loss of LNG demand could allow the storage deficit to slip by more than 100 billion cubic feet from early July to early September.In the meantime, however, impressive warmth could help maintain support.

Moreover, as noted Lindsay Schneider, an analyst at RBN Energy LLC, Europe continues to absorb “huge volumes of LNG to compensate for dwindling Russian supplies” due to the war in Ukraine as the continent strives to “strengthen storage before winter”.

Whether U.S. exporters can meet it, demand for LNG is booming and supporting global prices, she said. This, in turn, provides a bullish undercurrent for Nymex futures. “All of this comes as another major exporting nation, Australia, faces its own critical winter energy crisis and South American demand heads towards its seasonal peak, straining an already tight market.” , said Schneider.

Friday Spot Price

After two straight advances on strong cooling demand, spot gas prices fell alongside futures on Friday.

NGI’s Spot Gas National Avg. sank 85.5 cents to $6,770 ahead of the June 16 long weekend.

Demand remained strong ahead of a weekend that was expected to be dangerously hot as far north as the Dakotas.

On Friday, the National Weather Service (NWS) reported widespread highs in the 80s to 90s across the central United States and hundreds in the Southwest. Major eastern markets also baked amid temperatures ranging from the mid-80s to low-90s.

Still, spot prices fell to the lower 48s as markets tried to assess the various moving parts impacting supply/demand balances. Eastern prices led the decline.

Algonquin Citygate fell $1,260 a day to an average of $6,585, while Transco-Leidy Line lost $1,050 to $6,275 and Columbia Gas fell 69.5 cents to $6,560.

Elsewhere, Henry Hub fell 55.5 cents to $7.335 and SoCal Citygate fell 73.0 cents to $6.865.

Unlike Friday’s declines, national cooling demand is expected to prove even more robust in the coming days as high pressure strengthens over the East and South, according to NWS projections.

AccuWeather said 90s highs will cook much of the country in the coming trading week.

Its meteorologists see “widespread highs in the mid to upper 90s with additional areas likely to record temperatures in the 100s,” the company said. “These forecasts represent temperatures around 15 to 25 degrees above average” in many parts of the central and eastern regions of the Lower 48.

“To make matters worse, the high humidity and sunshine will be about as intense as it gets with the summer solstice on Tuesday,” AccuWeather added. “The few days either side of the official start of summer are a time when the rays of the midday sun are as high in the sky as they have ever been at any time in the year. ‘year.”

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