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November gas futures post gains even as fundamentals reflect little change


According to Market Intelligence, December 2022


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November gas futures post gains even as fundamentals reflect little change

Following a 5.8-cent gain in the prior session to settle at $2.891/MMBtu, NYMEX November natural gas futures were higher ahead of the Wednesday, Oct. 11, open, despite stalled fundamentals. At 7:01 a.m. ET, the contract was 4.2 cents higher at $2.933/MMBtu.

The latest National Weather Service forecasts for both the six- to 10-day and eight- to 14-day periods continue to show above-average temperatures enveloping the entire eastern two-thirds of the country and portions of the Southwest, which suggests subdued demand as lingering cooling load looks to remain limited by lower high temperatures implied by the calendar and heating load is kept at bay.

Lackluster weather-related demand implied by temperature outlooks should encourage natural gas to flow more freely into underground storage facilities, thereby allowing for the rate of weekly inventory builds to accelerate moving closer to the titular end of the refill season on Oct. 31.

Activity in the tropics, however, could also play a role in the pace of storage building going forward.

Already, storage improvements in the next few weeks are likely to be impacted by idled production due to Hurricane Nate, which made landfall on the Gulf Coast late Oct. 7.

An Oct. 10 update from the Bureau of Safety and Environmental Enforcement shows that about 46.12% of Gulf of Mexico natural gas output, equivalent to almost 1.5 Bcf/d, remained offline, down from a shut-in peak of 2.5 Bcf/d on Oct. 8. About 58.53% of total regional oil output remains idled, or 1.02 million barrels of oil per day, from 1.62 million barrels per day offline on Oct. 8.

The National Hurricane Center is monitoring Tropical Storm Ophelia, which was about 785 miles southwest of the Azores, with maximum winds of 50 mph and a southeastward motion at 6 mph, at 11 p.m. ET on Oct. 10. It is expected to strengthen in the next 48 hours and to reach hurricane status by Thursday.

The most recent storage report from the U.S. Energy Information Administration detailed a 42-Bcf build for the week ended Sept. 29 that was below both the 91-Bcf five-year-average build and a 76-Bcf addition seen in the corresponding week in 2016. It took working gas in storage to a total of 3,508 Bcf, or 161 Bcf below the year-ago level and 8 Bcf below the five-year average of 3,516 Bcf.

Should weekly storage builds match or trail the five-year average through the balance of the traditional injection season, natural gas inventories could end the season around 3.8 Tcf, according to the EIA.

At the cash markets, next-day natural gas pricing predominantly advanced Tuesday, in line with futures.

Looking at the key delivery locations, an almost 5-cent increase brought Chicago day-ahead gas price action to an index at $2.761/MMBtu, as nearly 2-cent gains on average took benchmark Henry Hub and PG&E Gate spot gas prices to indexes at $2.888/MMBtu and $3.071/MMBtu, respectively. A roughly 1-cent uptick nudged Transco Zone 6 NY hub activity to an index at $2.889/MMBtu.

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In regional terms, Midwest and Gulf Coast next-day gas prices rose by around 3 cents on average to indexes at $2.634/MMBtu and $2.772/MMBtu, respectively. West Coast cash gas pricing bucked the wider uptrend with a near 3-cent slump in deals averaging at $2.312/MMBtu, as Northeast spot gas price action tacked on about 2 cents to average at $2.372/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.