Natural gas futures prices rise as Ida shuts down Gulf Coast production
Natural gas futures soared to the stars on Friday, exploding higher for a second day as Hurricane Ida appeared to move away from liquefied natural gas (LNG) export facilities as it headed towards the Gulf Coast. The September Nymex contract came off the board at $ 4.370, up 18.6 cents day / day and 47.3 cents in the past two sessions. The October futures contract stood at $ 4.388, up 17.7 cents from Wednesday’s close.
In one look :
- GOM production shutdown
- Widespread storage jitter
- Liquidity rallies in persistent heat
Spot gas prices also rose in the Lower 48, even as temperatures are expected to moderate in the coming days. Spot Gas National Avg from NGI. climbed 12.5 cents to $ 4.285.
A day away from the government’s last storage report, traders still seemed to be grappling with the dire situation looming as winter approaches. The Energy Information Administration (EIA) reported a meager injection of 29 billion cubic feet into inventory for the week ending August 20. In addition to being well below pre-report estimates, modest construction widened the deviation from the five-year average to 7% from 6% in the previous period.
Analysts from Tudor, Pickering, Holt & Co. (TPH) attributed the bulk of the below-average construction responsibility to the south-central region, where 14 Bcf were pulled by standards a circulation of 5 Bcf. The team attributed the week-to-week change in inventories to a number of factors, including falling demand for power generation, which fell below 40 Bcf / d during the reporting period. This was offset by increased flows to Mexico, which returned to around 7 Bcf / d. Demand for LNG feed gas also strengthened, increasing by 0.8 Gcfd week / week, according to TPH.
The Schork group noted that 22 weeks after the start of the injection season, the gas market had replaced only half of the 2.208 Tcf delivery last winter. Regionally, after back-to-back withdrawals of just 3 billion cubic feet in the previous two weeks, the South Central salt facility reported a massive drop in inventory of 15 billion cubic feet. In the past three months, a net amount of 73 billion cubic feet, or 17% above normal, had been removed from the region’s storage.
“However, due to a robust injection of 152 Gcf over the previous four months, this season’s net fill of 79 Gcf is 58 Gcf (276%) above the five-year average, 35 Gcf (80%) at above the seasonally adjusted time series but 27 billion cubic feet (25%) below the pace of last year’s Covid, “Schork analysts said.” This region tends to start winter with around 298 Bcf in soil, 47 Gcf or 13.6% below the five year average. “
As for the next EIA report, preliminary TPH modeling points to a construction of 27 Bcf, which would be bullish compared to the five-year average injection of 60 Bcf. The team of analysts at TPH said on Friday that the week’s cumulative data showed an increase of nearly 2 billion cubic feet per day in demand for power generation and continued strength in LNG exports.
NGI data showed deliveries of feed gas to U.S. LNG terminals were just under 11 billion cubic feet on Friday.
In the crosshairs
Concerns over demand for LNG, which accounts for around 10% of total domestic consumption, had started to surface in recent days as Ida, as it gained momentum, headed for export facilities. of Louisiana. A slight shift to the east by Friday put the storm on track to make landfall in central Louisiana. However, storms can change direction quickly.
The National Hurricane Center (NHC) said Ida will approach the central Gulf Coast on Sunday afternoon. Despite being a Category 1 storm with winds of 75 mph on Friday afternoon, Ida is expected to strengthen over the warm waters of the Gulf of Mexico (GOM) and possibly be a major storm when it crashes to the ground.
The NHC said total precipitation accumulations of eight to 16 inches, with isolated maximum amounts of 20 inches, were possible from southeast Louisiana to the Mississippi and Alabama coasts until Monday morning. Ida was scheduled to turn northeast as it headed inland later Monday, with total precipitation of four to eight inches possible in southern and central Mississippi.
NatGasWeather said Louisiana remained “in the sights of the most dangerous eye wall,” with minor risks to far eastern Texas. The impacts were to be highlighted by the loss of demand due to rain, higher wind production, power outages and cooling. Declines in LNG exports were also expected.
“The amount of LNG feed gas to the United States and for how long depends on whether or not the Cameron LNG facility in Louisiana is hit by a direct hit, as it averages about 1.8 Gcf / d, ”NatGasWeather said. The firm stressed that the bulls would prefer LNG to keep circulating as much as possible to keep exports strong. As such, they might prefer to see Cameron sacrificed to Sabine Pass LNG, which consumes 3.5 Gcf / d.
“This, of course, assumes the track fits in the latest forecasts from the NHC and the Global Forecast System,” NatGasWeather said. Ida should also be “strong enough to inflict damage on Cameron LNG, which is not a given, especially if Ida’s trajectory shifts slightly to the east.” There would also likely be a dangerous storm surge and torrential rains that could impact oil and gas production along the Gulf Coast, NatGasWeather said. This could include the risk of flooding in New Orleans due to the combination of a storm surge and heavy rain.
By noon as of Friday, nearly half (48.8%) of the natural gas produced in the GOM had been taken offline, according to reports. More than half of the crude produced was also blocked, around 58.5%, operators told the Interior Ministry’s Office of Security and Environmental Enforcement (BSEE).
GOM’s natural gas production from federal waters averaged 1.088 Bcf / d before the shutdowns began, according to BSEE. Crude oil production averaged about 1.64 million barrels per day. GOM now supplies around 5% of the country’s natural gas supply and 17% of oil.
BSEE compiles operator reports before and during storms, providing production updates. It also details the evacuations of platforms and platforms, as well as the resumption of operations.
By noon on Friday, staff had been evacuated from 89 production platforms in the GOM, or nearly 16% of the 560 manned platforms, said the BSEE. Evacuations had also taken place from a moored platform (not dynamically positioned), or about 9% of the 11 currently in service.
A total of 11 unmoored platforms had also been moved, or 73% of the 15 dynamically positioned (DP) platforms. PDs can be moved out of the location with the personnel remaining on board.
With production already slashed and pipelines warning shippers of delivery issues as they close ahead of Ida, spot markets rallied on Friday. The gains were widespread as forecasts showed demand to remain strong throughout the weekend.
Daytime temperatures were expected to stay firmly between 90 and 100 over the weekend, but then dropped as a warm upper ridge lost steam. The weakening was to usher in much cooler highs in the 1970s and 1980s for most of the country, aided by Ida.
Wood Mackenzie said on Friday that several pipelines were posting hurricane-related advisories. Destin Pipeline Co. LLC said on Friday that the Main Pass 260 rig would be evacuated and the Pascagoula, Mississippi processing plant would be shut down. Transport services would then be unavailable. Therefore, High Point Gas Transmission LLC alerted customers that it would not be able to transport gas through its interconnection meter with Destin.
On the pricing side, spot gas prices at the Henry Hub climbed 29.5 cents to an average of $ 4.340 for gas delivery through Monday. Texas liquidity also strengthened, with the largest increases in the western part of the state. Waha jumped 25.0 cents to $ 4,100.
In the southeast, Transco Zone 5 rose 35.0 cents to $ 4.550 for the three-day gas period.
Gains were much lower in the Appalachians, but Tenn Zone 4,200L climbed 15.5 cents to an average of $ 3.965.
Most of the northeastern points lost ground as slightly cooler weather was en route to the region. Cash at Transco Zone 6 NY fell 16.0 cents to $ 3.830 for gas delivery through Monday.