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November natural gas sheds storage-driven gains to end in red

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Rate case activity slips, COVID-19 proceedings remain at the forefront in August


November natural gas sheds storage-driven gains to end in red

NYMEX November natural gas futures turned higher Thursday, Oct. 5, but the market backed off the $2.995/MMBtu session high delivered after the release of a surprisingly small injection into natural gas inventories and finished in the red. The contract ended the session 1.7 cents lower at $2.923/MMBtu.

The total working gas supply climbed just 42 Bcf to 3,508 Bcf in the week to Sept. 29. With comparisons to the 76-Bcf addition in the same week a year ago and the 91-Bcf five-year-average injection, the modest surplus to the five-year average turned to a deficit of 8 Bcf, the first time inventories have registered below the five-year average since the week of January 20, and the year-on-year deficit widened to 161 Bcf.

The market had anticipated a 51-Bcf build to stocks for the review week as injections were seen hampered by lingering warm weather that brought 91.7% more cooling-degree days than normal for the week.

On the surprisingly lower figure, the contract was jerked from its prerelease high of $2.976/MMBtu, but upon the digestion of the figure, the market quickly returned gains on the expectation that end-of-season inventories will be ample to meet winter demand.

Weather outlooks support additional small weekly gains to natural gas inventories as above-average temperatures in the eastern U.S. are expected to mix with below-average temperatures in the central U.S. in the six- to 10-day period to drive demand for both late season cooling and early heating.

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In the eight- to 14-day projection, the National Weather Service expects above-average temperatures to return to large portions of the country, with only a portion of the Southeast, south central and an area in the northwest expected to see below-average temperatures.

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The anticipation of modest weekly additions to natural gas inventories through the end of the titular injection season on Oct. 31 is helping to keep a floor under values, while the calendar and strong production provided a counter weight and limited the market's upside potential.

The tropics will continue to play a role in market momentum leading up to the end of hurricane season on Nov. 30 and are currently offering some mixed support as the National Hurricane Center monitors Tropical Storm Nate.

Models suggest that Tropical Storm Nate will develop into the next hurricane to hit the U.S. mainland with the trajectory taking it into the Gulf of Mexico's key production area.

The latest forecast from the National Hurricane Center calls for the storm to push towards the southern Gulf of Mexico by Friday evening and has shifted the cone to the west in parts of Louisiana and Mississippi.

At 2 p.m. ET the storm was about 50 miles northwest of Puerto Cabezas, Nicaragua, and about 50 miles south-southwest of Puerto Lempira, Honduras, packing maximum sustained winds of 40 mph as it moved northwest at 9 mph.

Impact to oil and natural gas production from the storm could drive sharper upside support as shut-in production could further impede the market's ability to build inventories that, while still within the five-year historical range, are now below the five-year average of 3,516 Bcf.

As the storm moves inland and across the central and eastern U.S., impact to power infrastructure and the cooler weather that typically accompanies such storms could depress demand and limit the impact of any lost production.

The Bureau of Safety and Environmental Enforcement, which monitors production outages, 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.

Cash gas trades were mixed again as regions responded to mixed demand expectations driven by weather.

Retreating after impressive gains in previous session, deals at Transco Zone 6 NY were nearly 10 cents lower to an index below $2.70, while Tetco-M3 traded more than 15 cents lower to an index near $1.45.

With demand support, trade at the benchmark Henry Hub was about 10 cents higher to an index around $2.90, Waha gained about 15 cents to an index near $2.60 and Chicago added about 10 cents to an index near $2.80. In the West, SoCal Border trades were nearly 15 cents higher to an index near $2.70 and PG&E Gate traded about 1 cent higher to an index near $3.15.

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.