Huge natural gas forward basis moves continued for pipeline capacity-starved New England, but hefty premiums also shifted further west during the short Nov. 17-21 period, NGI’s Forward Look data showed. With several inches of snow falling and a stormy outlook ahead, the Rockies and Pacific Northwest posted sharply higher forward prices.
Northwest Sumas December basis picked up 79.0 cents through the period to reach $3.465, according to Forward Look. Sumas prompt-month fixed prices hit $10.239, while January jumped 89.0 cents to $10.093. The balance of winter (December-March) picked up 83.0 cents to average $8.742/MMBtu, and the summer strip (April-October) moved up 22.0 cents to $4.410.
Similarly steep gains were seen at Opal, where December basis tacked on 67.0 cents to reach $2.320, Forward Look data showed. This represented a fixed price of $9.096 for the prompt month. Further out the forward curve, the January contract climbed 89.0 cents to reach $9.263 and the balance of winter added 82.0 cents to average $8.262. The summer strip, meanwhile, ticked up only 13.0 cents to average $4.560.
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The National Weather Service (NWS) said a shortwave trough in the eastern Pacific was expected to arrive in the Pacific Northwest on Tuesday. It could bring low-elevation rain and mountain snow to the region before spreading over the Northern Rockies.
The system is forecast to then shift over the Northern/Central Plains ahead of Thanksgiving. Snowfall was expected primarily over the northern Cascades, where up to one foot of snow and isolated higher amounts were expected, according to NWS. Freezing rain and some sleet also were likely to accumulate over portions of east-central Washington.
By Friday, the next storm is likely to be knocking on the doorstep of the Northwest, according to AccuWeather. The forecaster said this would be the start of a much stormier and colder pattern overall for the West heading into early next week.
Pipelines in the region already were being impacted by the frigid weather. Kern River Gas Transmission reported low linepack this week, with deliveries limited beginning over the weekend and remaining through the week so far.
Criterion Research LLC noted that Canadian imports into the Pacific Northwest have ratcheted up amid the bitter conditions, with regional demand remaining high even as overnight temperatures trended on the warm side. Storage facilities in the region also have boosted withdrawals.
Meanwhile, inventories at Pacific Gas & Electric Corp. (PG&E) are low. Maintenance along the PG&E pipeline, which began Monday, is set to continue through late November, adding to constraints, Criterion said. PG&E declared an operational flow order amid the tight conditions. Storage withdrawals extended into Southern California as well.
“PG&E’s storage was in especially bad shape as its net inventory dropped to only 3.8 Bcf,” Criterion Research’s James Bevan, director of research, said. “To put this in perspective, aside from 2019 (and this year), inventories have only been lower once, and that was 2018’s end of season. Not a promising look.”
Henry Hub Volatility
With a stretch of widespread chilly air finally showing signs of easing, Henry Hub forward prices continued to post mostly gains during the short trading period.
There are lots of potential reasons prices have risen close to $7.00 again. Some traders are pointing to the potential for a railroad strike that could limit coal deliveries and prop up gas demand. The possibility of cold weather returning in December also provided momentum for bulls, as has the typical volatility seen ahead of contract expiration.
NatGasWeather said the weather data are mixed. The Global Forecast System trended a little warmer for the next five days, a few heating degree days colder for Nov. 27-Dec. 2 and warmer again for Dec. 3-7.
There were major changes in the latest data related to the timing of swings in national demand, with demand easing for the next week as temperatures are forecast to climb into the 60s and 70s over the southern United States and into 40s and 50s over the northern states.
“Frigid air remains on track to arrive over Northwest, Mountain West and Northern Plains Nov. 29-Dec. 7 with lows of minus 10s to 30s for regionally strong demand,” NatGasWeather said. “However, recent weather data wasn’t as aggressive advancing cold air eastward Dec. 2-7, thereby keeping the southern and eastern U.S. mild most days with highs of 40s to 70s.”
Given the recent cold that’s blanketed much of the Lower 48, market observers expected a considerable decline in storage inventories. After all but erasing deficits to historical levels, storage deficits could widen over the next two weeks.
At noon ET on Wednesday, the Energy Information Administration (EIA) is set to publish its weekly inventory report. Estimates ahead of the report were wide ranging, from a draw as light as 60 Bcf to one as steep as 111 Bcf.
A Bloomberg survey of nine analysts had a range of draws from 74 Bcf to 111 Bcf, with a median pull of 86 Bcf. Estimates submitted to a Wall Street Journal poll also were within that wider range and averaged an 89 Bcf withdrawal. NGI estimated a lower-end draw of 65 Bcf.
EBW Analytics Group LLC said the cold December now favored by independent weather forecaster DTN could rapidly deplete the storage cushion and reintroduce upside price risks. These risks come into play particularly if Freeport LNG hits its updated guidance. The liquefied natural gas export facility said last week it is targeting mid-December for initial operations.
“Cold may have to prove enduring to sustain Nymex risk premiums on a seasonal basis, but renewed upside for the 30-45 day period remains possible,” EBW senior analyst Eli Rubin said.
The December Nymex gas futures contract inched higher Tuesday to settle at $6.779, up slightly from Monday’s close of $6.776.
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