Hotter weather couldn’t prevent an ultimate fall in spot gas prices for the June 1-5 period, with markets across the Lower 48 falling week/week. Losses were fairly small, however, and NGI’s Weekly Spot Gas National Avg. was down only 5.0 cents to $1.610.
Temperatures out West remained well above-average throughout the week, and heat extended across Texas, the South and Southeast as well. Even northern states finally started seeing warmer weather, with highs in Washington, DC, soaring into the low 90s.
Although power burns were strong and initially lifted cash markets early in the week, those gains failed to hold and by Friday, it was a sea of red across the country.
Markets throughout the Southeast posted similar declines of up to 11.5 cents, while much smaller losses were seen in Appalachia.
The Northeast posted the only gains, although most were very modest at only a few pennies week/week.
After six weeks of large swings, natural gas futures had a steadier foot during the first week of June even as liquefied natural gas (LNG) demand sank to fresh lows. Whether it was because much of the expected LNG demand loss had already been priced into the market, or because natural gas production is projected to bottom out this month, traders appeared content with the recent trading range.
The July Nymex gas futures contract swung in a narrow band of only 12 cents throughout the June 1-5 week, with the last four sessions resulting in day/day changes of less than a nickel. The prompt month capped the week at $1.782, up just eight-tenths of a cent from Monday’s close.
“The market wants to see how the balance shakes out after this decline in LNG, as we need more from the demand side to make up for that decline,” said Bespoke Weather Services. “In the end, we have stated that the question regarding containment will likely not be settled for awhile yet, keeping us inside the same $1.60s to $1.90s prompt-month trading range. If LNG can bounce back, that would be bullish, but that could be difficult given the low price environment globally.”
Talk of potential U.S. cancellations had been brewing since last year as new capacity and a mild winter left the global market awash in supply, but the domestic market managed to stay afloat even when Covid-19 first emerged. That changed over the past week, however, as feed gas deliveries to U.S. terminals plunged to 3.88 Bcf/d in a sign of the more than 30 U.S. LNG cancellations that have been reported for June. Although volumes were back at around 5.0 Bcf/d on Friday, more downside risk looms as cancellations are seen continuing through October.
Elevated European storage inventory levels continue to pressure National Balancing Point and Title Transfer Facility prices, and…
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