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June gas renews losses as storage, weather feed pressure

Aftersurging by 10 cents ahead of the weekend to settle at $2.178/MMBtu, amidreports of an explosion on Spectra's 30-inch Texas Eastern pipeline in westernPennsylvania, June natural gas futures recoiled in overnight trading leading upto the Monday, May 2, open, as fundamental weakness implied by buildinginventories and moderating weather outlooks that should keep demand scantweighed on the market anew. The contract was lasteyed 5 cents lower at $2.128/MMBtu.

., parent of ,said an explosion andsubsequent fire occurred at 8:13 a.m. ET on April 29, on the Texas Easternpipeline in Salem Township inWestmoreland County, Pa. In a May 1 update, Spectra Energy said itcontinues to cooperate with the Pipeline and Hazardous Materials SafetyAdministration, the agency charged with the investigation. The PennsylvaniaDepartment of Environmental Protection has completed air quality monitoring andSpectra is conducting surface water testing.

Additionaldetails will be provided as they become available, Spectra Energy said.

Havingdigested the news, the natural gas market returned attention to inventoriesthat remain hefty and continue to keep the downside attractive, after notchinga larger-than-expected net 73-Bcfaddition in the week to April 22 that took the total amount ofworking gas in storage to 2,557 Bcf, or 870 Bcf above the year-ago level and832 Bcf above the five-year average of 1,725 Bcf.

Thereported storage build bested the consensus estimate formed at a 70-Bcfinjection. Although smaller than the 84-Bcf addition to stocks seen at the sametime last year, it outperformed the 52-Bcf five-year-average build.

Milderweather that generated 36.8% fewer heating degree days in the week to April 23compared to the same week last year and 46.9% fewer than average, according tothe degree day data from the National Oceanic and Atmospheric Administration,is seen to have impacted the week's data that marked a significant uptick inthe rate of weekly storage injections after a slow start to the inventoryrefill season.

Withadditional moderate weather conditions in store, demand should remain subduedand allow for natural gas to flow more heavily into underground storagefacilities.

TheNational Weather Service sees above-average temperatures enveloping nearly allof the country's northern tier, the fringes of the Gulf Coast and parts of thePacific in the upcoming six- to 10-day period, as average temperatures settleover much of the Mid-Atlantic, small areas in the Midwest, the bulk of theSoutheast into a majority of the Gulf Coast and a section of Wyoming into a fewlocations on the Southwest. Below-average temperatures are forecast to becontained to southern Florida, a portion of Texas and most of the Southwest.

Above-averagetemperature spill into the entire Mid-Atlantic and nearly all of the Southeastto ultimately hold over a majority of the country further out to the eight- to14-day period, confining average temperatures to the Gulf Coast into portionsof the Southwest and shrinking the scope of below-average temperatures to asmaller patch of the Southwest into a corner of Texas.

Diminishedcalls on natural gas for heating requirements amid milder weather and limitedcooling demand pending the onset of the cooling season should encourage largerstorage injections ahead that would augment already robust inventories.

Incash trading, the natural gas offering booked on April 29 that was revised fora two-day Sunday-Monday flow to accommodate the start of the new month had amixed showing but predominantly shed value amid pressure from the weekendinclusion in the altered product.

Majordelivery locations saw diverging spot gas prices as the Northeast responded tothe reports of the explosion on the pipeline that connects Texas and the GulfCoast with high demand markets in the region. Texas Eastern declared aforce majeure event due to the unplanned outage downstream of its DelmontCompressor Station in Delmont, Pa. It was unclear how long the force majeurewould remain in effect. The company said in a May 1 critical notice that repairefforts to restore capacity are continuing, but capacity remains at zerothrough gas day May 3.

Aheadof the weekend, Transco Zone 6 NY cash gas prices rose by around 6 cents onaverage to an index at $1.460/MMBtu. Conversely, while benchmark Henry Hubnext-day gas price action held near unchanged day on day at an index at$1.891/MMBtu, PG&E Gate day-ahead gas price activity unraveled about 2cents on the session to average at $1.966/MMBtu, as Chicago hub pricingdeflated by roughly 1 cent in deals averaging at $1.933/MMBtu.

Regionally,the downside prevailed, as losses on either side of 1 cent on average observedacross the country took spot gas pricing to indexes at $1.662/MMBtu on the WestCoast, at $1.873/MMBtu in the Midwest, at $1.806/MMBtu across the Northeast andat $1.805/MMBtu in the Gulf producing region.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.