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November gas extends downside overnight

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November gas extends downside overnight

After ending the prior session down 1.7 cents at $2.923/MMBtu, NYMEX November natural gas futures worked lower overnight ahead of the Friday, Oct. 6, open, despite warmer weather outlooks that could spell lingering cooling demand and a continuation of the lackluster rate of weekly storage builds. At 6:44 a.m. ET (1044 GMT) the contract was 1.0 cent lower at $2.913/MMBtu.

Natural gas inventories built by a modest 42 Bcf to 3,508 Bcf during the week ended Sept. 29, according the U.S. Energy Information Administration's latest storage report. With comparisons against a 76-Bcf prior-year injection and a 91-Bcf five-year-average addition, the reported build turned the modest surplus to the five-year average into a deficit of 8 Bcf and expanded the year-on-year deficit to 161 Bcf.

This storage data marks the first time working gas stocks fell below the five-year average since Jan. 20, the EIA said. Stronger power burn despite steady natural gas production likely contributed to a reduction in the pace of inventory-building relative to the prior week, the agency added.

Stubborn heat in mid-range forecasts looks to keep power-sector demand for natural gas elevated in the coming weeks as utilities work to meet cooling requirements, suggesting weekly storage builds could remain modest moving closer to the end of the titular refill season on Oct. 31.

Revised National Weather Service projections show above-average temperatures enveloping the bulk of the country's eastern half and portions of the Southwest in the upcoming six- to 10-day period, then spilling into nearly the entire Midwest, most of the Rockies and fringes of the Gulf Coast further out to the eight- to 14-day period.

Average and below-average temperatures settle over the west-central U.S. and most of the West in the shorter-range view, but below-average temperatures disappear and average temperatures shrink in scope to be contained to parts of the south-central U.S. and a section of the West in the longer-range view.

Activity in the tropics feed mixed signals to the market however, as Tropical Storm Nate threatens to both disrupt oil and natural gas production in the Gulf of Mexico and depress demand as it moves inland and across the central and eastern U.S.

Nate was last seen at about 60 miles east-northeast of Isla Guanaja, Honduras, and about 275 miles south-southeast of Cozumel, Mexico, packing maximum sustained winds of 45 mph as it moves north-northwest at 14 mph, according to an 5 a.m. ET advisory on Oct. 6 from the National Hurricane Center.

It is expected to move over eastern Honduras and over the northwestern Caribbean Sea into Friday, then to approach the northeastern part of the Yucatan Peninsula and the adjacent islands into Friday night before moving into the Gulf of Mexico on Saturday. Strengthening is anticipated.

The Bureau of Safety and Environmental Enforcement reported about 207 MMcf/d of natural gas production in the Gulf of Mexico is currently shut-in, equal to about 6.4% of the region's gas-producing capacity. In addition, about 254,607 barrels of oil per day, or more than 14.5% of the oil production in the Gulf, is offline.

In cash action, the price of natural gas for day-ahead flow predominantly favored the upside Thursday on the back of prospects for mostly elevated demand at the close of the workweek.

Looking at the key delivery locations, a roughly 13-cent increase steered benchmark Henry Hub spot gas price activity to an index at $2.933/MMBtu, as a near 8-cent gain took Chicago next-day gas pricing to an average at $2.796/MMBtu and an approximate 1-cent uptick brought PG&E Gate cash gas price action to an index at $3.160/MMBtu. Bucking the wider advance, an almost 1-cent slump nudged Transco Zone 6 NY hub pricing to an average at $2.760/MMBtu.

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Regionally, Gulf Coast day-ahead gas price action logged an almost 6-cent gain in deals averaging at $2.802/MMBtu, as Midwest cash gas price activity added about 7 cents to average at $2.683/MMBtu and West Coast spot gas pricing climbed by nearly 5 cents to an index at $2.394/MMBtu. Northeast next-day gas prices defied the broad uptrend with a 4-cent decline on average to an index at $2.111/MMBtu.

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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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.