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November gas continues to shed value on weather pressure


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November gas continues to shed value on weather pressure

Followinga 5.3-cent decline to a finish at $2.906/MMBtu ahead of the weekend, November naturalgas futures extended lower in overnight trading leading up to the Monday, Oct. 3,open amid weather pressure, as a hurricane that continues to pose a threat to easternU.S. demand in the near term combines with the anticipation of demand erosion amidmilder fall weather in the midrange. The contract was last seen 1.9cents lower at $2.887/MMBtu.

HurricaneMatthew was last located about 470 miles southwest of Port Au Prince, Haiti, andabout 370 miles south-southeast of Kingston, Jamaica, packing maximum sustainedwinds of 130 mph as it moves northward at 6 mph, according to a 5 a.m. ET, Monday,Oct. 3, update from the National Hurricane Center. This general motion is expectedto continue through Tuesday. The center of the hurricane is forecast to approachJamaica and southwestern Haiti tonight and eastern Cuba on Tuesday.

Althoughlargely expected to steer away from the U.S. Gulf of Mexico, Hurricane Matthew couldstill bring heavy rainfall to portions of the eastern U.S. as the week unfolds,  which could deflate demand beyond the lower loadexpectations signaled by typical seasonal weather.

Furtherout, the absence of cold weather in forecasts combined with the prevalence of lingeringabove-average temperatures expected to generate lower high temperatures given thetime of the year suggests tempered overall demand, as late-season cooling load abatesand early heating demand is averted.

In itslatest forecasts, the National Weather Service sees above-average temperatures holdingover half of the Northeast, most of the West and the bulk of the South in the upcomingsix- to 10-day period, before expanding in scope to overtake nearly the entire the eight- to 14-day period. Average temperatures settle over a section of theNorthwest, the Midwest and a large area of the East in the shorter-range periodbut shrink in scope in the longer range to be confined to portions of the Northeastand Mid-Atlantic, while below-average temperatures do not make an appearance inthe outlooks.

Subdueddemand amid moderate weather should free up natural gas production for storage building,allowing for an uptick in the rate of weekly injections that should keep inventorieson track to reach what is expected to be a record-high end-of-season level estimatedat 4,042 Bcf, according to the U.S. Energy Information Administration.

Totalworking gas in storage currently sits at 3,600 Bcf, or 90 Bcf above the year-agolevel and 220 Bcf above the five-year average of 3,380 Bcf, after the EIA outlineda net 49-Bcf additionto stocks for the week to Sept. 23. The reported build compared against the 97-Bcffive-year average injection and the 99-Bcf injection seen in the corresponding weekin 2015.

Preliminaryestimates for the next weekly storage data that will cover the week to Sept. 30suggest an improvement in the pace of storage building, as outlooks call for aninjection in the low 70s Bcf, which would compare against a 95-Bcf five-year averagebuild and a 96-Bcf year-ago addition to stocks. Although the underperformance againsthistorical averages would result in an erosion of inventory overhangs, the improvementin overall stocks and additional mild weather ahead should continue to fuel bearishsentiments.

In cashtrade, price activity for natural gas booked on Sept. 30 for Saturday-through-Mondayflow was weaker in much of the country, as the typical weekend inclusion in therevised offering and milder weather conspired to fuel anticipation of diminisheddemand.

Lookingat the key hubs, a better-than-32-cent decline drove Transco Zone 6 NY spot gasprice action to an index at 32 cents/MMBtu, as losses on either side of 13 centson average took benchmark Henry Hub and Chicago day-ahead gas prices to indexesat $2.840/MMBtu and $2.720/MMBtu, respectively, and a near 11-cent reduction steeredPG&E Gate hub pricing to an index at $3.275/MMBtu.

Regionally,Northeast cash gas price activity tumbled by roughly 43 cents in trades averagingat $1.251/MMBtu, as Gulf Coast next-day gas pricing deflated by almost 13 centsto an index at $2.689/MMBtu. Midwest day-ahead gas price action unraveled around17 cents to average at $2.647/MMBtu, as West Coast spot gas prices fell by about10 cents on average to an index at $2.566/MMBtu.

Market prices and included industry data are current asof the time of publication and are subject to change. For more detailed market data,including power andnatural gas indexprices, as well as forwards and futures, visitour Commodities Page.