April Chills Bolster Natural Gas Forwards, Though Some Western Hubs Moderate
Drawing support from spring chills and a strengthening weather-driven demand outlook, regional natural gas forwards generally gained ground during the April 13-19 trading period, though a few western hubs moderated sharply week/week.
May fixed prices at Henry Hub climbed 12.9 cents to end the period at $2.225/MMBtu, mirroring gains in Nymex futures and setting the pace for increases of around a nickel to a dime at numerous Lower 48 hubs.
Updated forecasts from Maxar’s Weather Desk Thursday showed cooler trends for the eastern Lower 48 in both the six- to 10-day and 11- to 15-day windows.
The forecaster called for below normal temperatures to cover the eastern half of the country for most of the six- to 10-day (from next Tuesday through April 29) period.
“This includes the South, where trends are also wetter with rounds of unsettled conditions over the course of the period,” Maxar said. “The forecast has Chicago with lows in the upper 30s to low 40s and highs in the 50s, and Atlanta with lows in the 50s and highs in the 60s to low 70s.
“Below normal temperatures are also in the East, established under high pressure early and maintained by easterly flow during the second half. Alternatively, a ridge builds into the West with normal to above normal temperatures.”
Maxar said it expected cooler-than-normal temperatures to extend into the 11- to 15-day window for the eastern Lower 48.
“Above-normal temperatures favor the Interior West, but California returns to the cooler side of normal late as a Pacific trough moves overhead,” Maxar said.
Chicago Citygate May fixed prices gained 9.2 cents week/week to end at $2.041, while Transco Zone 5 picked up 10.6 cents to reach $2.273.
Meanwhile, with updated weather maps advertising warmer temperatures over the western Lower 48, several regional hubs accordingly saw moderating premiums during the April 13-19 period. Malin shed 33.9 cents for May delivery, falling to $2.742. Opal May fixed prices dropped 25.6 cents to end at $2.640.
SoCal Surges
SoCal Citygate was a notable outlier, with May fixed prices surging 46.4 cents for the period to $5.026.
Southern California Gas (SoCal) was scheduled to perform remediation work on its Line 5000 starting last Monday (April 17) and extending through April 28, Wood Mackenzie analyst Quinn Schulz said in a recent note to clients.
The work was expected to restrict capacity through the EP-Ehrenberg/NBP-Blythe sub-zone by 0.63 Bcf/d, equating to a cut of around 174 MMcf/d day/day when comparing pre-maintenance volumes to timely flows on the first day of the event, according to Schulz.
Still, the start of the maintenance coincided with a relatively low demand period for the region, according to Schulz.
“Demand recently nominated a past 30-day minimum of 2.05 Bcf on April 16,” the analyst said.
The higher SoCal Citygate forwards also come as Energy Information Administration (EIA) data showed the EIA Pacific region barrelling into the summer cooling season with a historically meager inventory cushion.
In the latest EIA storage report Thursday, Pacific region stockpiles rose 9 Bcf to 83 Bcf as of April 14, a 53.4% deficit to the five-year average of 178 Bcf.
Record LNG Exports
Nymex futures advanced during the April 13-19 period, including a 16.1-cent rally on Monday. Despite stumbling in Wednesday’s session, the May contract managed to finish in positive territory on Thursday, picking up 2.7 cents to settle at $2.249, up around a quarter versus the week-earlier period.
ICAP Technical Analysis analyst Brian LaRose highlighted “stiff resistance” associated with “the convergence of the 50-day moving averages and upper bollinger bands,” which repelled bulls during the period.
“Now watching to see if the 22-day moving averages can provide support,” LaRose told clients Thursday. “If they can, another run at the 50-day moving averages could be on tap for this week. If they cannot, a drift sideways/lower could be on tap for the May expiry.”
In terms of fundamentals, EBW Analytics Group attributed recent futures strengthening to a combination of recovery from a period of “extreme spot market weakness,” record-high LNG export volumes and bullish weather trends.
The strength in liquefied natural gas exports based on recent estimates could lead to “bullish analyst revisions” in the weeks ahead, according to EBW analyst Eli Rubin.
Recent EBW estimates put seven-day average liquefied natural gas exports at more than 14.5 Bcf/d, a new record high.
“Prior to March, weekly average demand had never surpassed 13.2 Bcf/d,” Rubin said. “The burst higher is tied to Freeport’s long-awaited reopening and new all-time facility records. Many analyst projections for the 2023 injection season appear to remain in the 13.0-13.5 Bcf/d range, however.
“Although seasonal maintenance work and a small risk of shut-ins later this fall may dispel recent strength, a likelihood of bullish revisions could help tighten seasonal storage trajectory projections in the coming weeks.”
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