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November natural gas gains in short covering with weather support

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November natural gas gains in short covering with weather support

NYMEX November natural gas futures turned higher Wednesday, Oct. 4, amid outlooks for warm weather that offer some demand support and suggest a slower rate of storage building in the final weeks of the titular injection season. Climbing to a $2.977/MMBtu intraday high, the contract slipped to finish 4.5 cents higher on the day at $2.940/MMBtu.

The recent string of losses opened the door to the day's short-covering rally fueled by weather outlooks that show heat in the eastern U.S. that should keep cooling demand a factor as the market attempts to augment the working gas supply in the last weeks of the injection season.

After two consecutive weeks of large storage builds resulting in part from the loss of power demand after two major hurricanes hit the southern U.S., natural gas inventory building slowed with the return of warm weather in major cooling regions.

For the week to Sept. 22, the U.S. Energy Information Administration reported a 58-Bcf build to stocks that was below the previous reported injection of 97 Bcf for the week to Sept. 15 and the 91-Bcf build reported for the week to Sept. 8.

Analysts and traders looking at the storage report for the week to Sept.29 see a build to stocks ranged from a 41-Bcf injection to as much as a 61-Bcf injection, with consensus formed at 51-Bcf build to stocks.

A build at consensus would drive the total working gas supply from the 3,466 Bcf in storage to 3,517 Bcf and would trim the year-on-five-year-average surplus to just 1 Bcf and widen the year-on-year deficit to 152 Bcf with comparisons to the five-year-average injection of 91 Bcf and the year-ago build of 76 Bcf.

The trimming of the five-year-average surplus is worrisome this late in the injection season, with only about three weeks left of the titular injection season, but with injections likely to continue into November.

Weather suggests any additional builds could be limited by lingering cooling demand as the National Weather Service's outlook for the six- to 10-day period shows above-average temperatures in the eastern third of the U.S. and in a portion of the West, while below-average temperatures engulf the remainder of the country and could drive early heating demand.

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In the eight- to 14-day period, the above-average temperatures expand to overtake all but portions of the Southeast, south central and a small area in the Northwest, where below-average temperatures are expected.

SNL Image

The tropics will remain a factor through November, and the National Hurricane Center is monitoring two systems that could have some impact to U.S. natural gas supply or demand.

Tropical Depression 16 was about 45 miles west-southwest of San Andres Island at 2 p.m. ET packing sustained winds of 35 miles per hour as it traveled northwest at 7 mph. The depression should be nearing the coast of Nicaragua early Thursday, move across northeastern Nicaragua and eastern Honduras late Thursday and emerge into the northwestern Caribbean Sea on Friday.

Additionally, an area of disturbed weather located over west-central Cuba and extending northward into the Straits of Florida is not expected to see further development.

Day-ahead markets were higher with weather and demand support.

Transco Zone 6 NY jumped nearly 35 cents to an index near $2.80, Tetco-M3 added about 65 cents to an index near $1.65, Henry Hub traded nearly 10 cents higher to an index atop $2.80, Waha bounced about 20 cents higher to an index atop $2.40 and Chicago gained about 15 cents to an index atop $2.70.

In the West, SoCal Border gained about 10 cents to an index atop $2.50 and PG&E Gate gained about 10 cents to 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.