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November gas unravels on bearish weather-related demand prospects

Afteradvancing by 1.7 cents to a settle at $2.923/MMBtu in the week's openingsession, November natural gas futures recoiled overnight ahead of the Tuesday,Oct. 4, open amid a lack of significant fundamental support, as theanticipation of weather-related demand weakness in the near term through themidrange combined with ongoing prospects for record-high end-of-season storage.The contract last traded 4.3 cents lower at $2.880/MMBtu.

Potentialpower infrastructure issues and cooler conditions associated with Category-4Hurricane Matthew currently churning in the tropics fed anticipation ofdiminished demand for natural gas as a fuel for power generation.

HurricaneMatthew was last located about 35 miles south of Tiburon, Haiti, and about 165miles south of the eastern tip of Cuba, packing maximum sustained winds of 145mph as it moves northward at 9 mph, according to a 5 a.m. ET Tuesday, Oct. 4,update from the National Hurricane Center.

Matthewis forecast to turn toward the north-northwest on Wednesday, the NHC said. Thecenter of Matthew is expected to approach southwestern Haiti into Tuesdaymorning, move near eastern Cuba late Tuesday and move near or over portions ofthe southeastern and central Bahamas Tuesday night and Wednesday. Longer range,five days out, models show Matthew moving up the Eastern Seaboard.

Furtherahead, forecasts suggests lackluster demand for either late-season cooling orearly heating, as lingering and prevalent above-average temperatures inoutlooks equate to lower high temperatures given the time of year, whilebelow-average temperatures span only a limited scope and briefly at that.

TheNational Weather Service sees below-average temperatures holding over the Northeastand the edges of the mid-Atlantic in the upcoming six- to 10-day period, asaverage temperatures settle over the balance of the mid-Atlantic, much of theMidwest and portions of the Southeast. Above-average temperatures encompass theWest, parts of the Midwest and most of the South.

Below-averagetemperatures disappear in the eight- to 14-day forecast, as above-averagetemperatures overtake nearly the entire country to leave only the Northeast anda small patch of the mid-Atlantic in the scope of average temperatures.

Shouldweather in the near-term and midrange outlooks keep demand deflated, naturalgas could flow more heavily into underground storage facilities, which woulddrive an uptick in the pace of inventory-building that has been lackluster throughoutmuch of the refill season to date.

Inits latest inventory report, the U.S. Energy Information Administrationoutlined a 49-Bcfinjection for the week to Sept. 23 that extended theslower-than-normal pace of storage-building, as it compared against the 97-Bcffive-year average build and the 99-Bcf injection seen in the corresponding weekin 2015. It took total working gas stocks to 3,600 Bcf, or 90 Bcf above theyear-ago level and 220 Bcf above the five-year average of 3,380 Bcf.

Earlyestimates for the next weekly storage data that will cover the week to Sept. 30suggest an improvement in the rate of weekly injections, as outlooks call forbuild in the low 70s Bcf, which would compare against a 95-Bcf five-yearaverage build and a 96-Bcf year-ago addition to stocks.

Whilea storage figure within the range of estimates would signal yet anotherunderperformance against historical averages that would further erode stockoverhangs, the overall improvement in inventories implied is seen keepingstocks on a path toward an all-time high end-of-season level estimated at 4,042Bcf, according to the EIA.

Incash trade, varied weather-related demand expectations drove choppy priceactivity for natural gas booked Monday for Tuesday flow.

Acrossthe major delivery locations, a near 68-cent gain was seen driving Transco Zone6 NY day-ahead gas price action to an index at 99.8 cents/MMBtu, as a 2-centadvance nudged benchmark Henry Hub spot gas pricing to an average at $2.860/MMBtu.Meanwhile, a scant less-than-1-cent reduction held Chicago hub activity almostunchanged on the day at an index at $2.719/MMBtu, as an almost 2-cent declinetook PG&E Gate next-day gas pricing to an average at $3.258/MMBtu.

On aregional basis, Northeast cash gas prices soared by around 32 cents on averageto an index at $1.567/MMBtu, as Gulf Coast next-day gas price activity notcheda near 1-cent slump in deals averaging at $2.683/MMBtu. Midwest day-ahead gaspricing added almost 2 cents on the session to average at $2.665/MMBtu, as WestCoast spot gas price action held flat at an index at $2.564/MMBtu.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.