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September natural gas reverses early gains, settles in the red

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Essential Energy Insights - November 2021


September natural gas reverses early gains, settles in the red

NYMEX September natural gas futures breached $3/MMBtu resistance, reaching $3.018/MMBtu on Monday, Aug. 14, but turned lower into the settle as the market considered the gains overdone. Ticking to a $2.925/MMBtu low, the contract settled 2.4 cents lower on the session at $2.959/MMBtu.

As the peak of the summer cooling season nears its end, market participants are looking to weather outlooks as they consider storage building efforts and end-of-season inventories.

Weather outlooks for the midrange period show above-average temperatures across large segments of the country through both the six- to 10-day and eight- to 14-day periods, while also outlining areas where below-average temperatures are expected.

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Above-average temperatures dominate in the eastern U.S. in both periods, while portions of the central and West should see below-average temperatures that could limit overall demand for cooling and power-sector consumption of natural gas to fuel power generators.

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Natural gas storage builds through the bulk of the injection season thus far have been bullish against the five-year average injections most weeks, resulting in a significant trimming of the year-on-five-year average surplus.

The closely watched surplus level was cut to just 61 Bcf, with the latest injection into the working gas supply of a modest 28 Bcf for the week to Aug. 4.

Despite the trimming of the surplus, the total supply at 3,038 Bcf is a healthy level that offers some downside pressure for values, with weekly injections expected to drive the supply to a near record level by the end of October.

The natural gas storage is expected to exceed 3,900 Bcf by the end of October, according to the latest U.S. Energy Information Administration forecast. This will equal the five-year average but fall short of the record 4,045 Bcf at the end of the 2016 injection season.

While the summer cooling season nears its end, the peak of the hurricane season is just ahead and activity in the tropics have picked up pace, providing a backdrop of concern for the market.

The National Hurricane Center, or NHC, is currently monitoring Tropical Storm Gert, which at 11 a.m. ET was situated about 460 miles west-southwest of Bermuda, moving north near 8 mph and packing sustained winds of 60 mph. The NHC expects the system to make a gradual turn toward the northeast with an increase in forward speed over the next 48 hours.

An additional disturbance situated several hundred miles west-southwest of Cabo Verde Islands at 2 p.m. ET is being monitored for development with a 30% chance of formation within the next 48 hours and a 60% chance over the next five days.

Trades in the day-ahead markets were done at higher prices as demand outlooks point upward in most regions.

At Transco Zone 6 NY, a gain of nearly $1.15 drove the index to more than $2.85. Added support came from pipeline capacity constraints. Tetco-M3 added nearly 25 cents, driving the index there to near $1.85. At the Henry Hub, trades were boosted about 5 cents to an index atop $2.95, while Waha bucked the wider trend, slipping by less than 1 cent to an index near $2.75. Chicago joined the broader uptrend, adding about 1 cent to an index near $2.90. In the West, SoCal Border trade was up more than 1 cent to an index near $2.75, while PG&E Gate bucked the trend with a loss of about 1 cent to an index below $3.30.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.