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November natural gas gains despite demand risk from Hurricane Matthew


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November natural gas gains despite demand risk from Hurricane Matthew

Novembernatural gas futures turned higher as the fresh week began Monday, Oct. 3, asCategory-4 Hurricane Matthew churns in the tropics on course to hit the U.S.East Coast with some slight potential impact on Gulf of Mexico oil and natural gasinfrastructure. Early losses to a $2.866/MMBtu intraday low reversed as thecontract headed back toward $3/MMBtu, trading as high as $2.937/MMBtu butfinishing the session 1.7 cents higher at $2.923/MMBtu.

Atlast look, the National Hurricane Center positioned Hurricane Matthew about 250miles southwest of Port-au-Prince, Haiti, and 195 miles southeast of Kingston,Jamaica, packing 140 mph winds and moving northward at 6 mph. The NHC said thaton the current track, the center of Matthew will approach southwestern Haitilate Monday, move near eastern Cuba late Tuesday and move near or over portionsof the southeastern and central Bahamas late Tuesday and Wednesday.Longer range, five days out, models show Matthew moving up the eastern seaboard.

Theheavy winds and rain associated with the storm are likely to have a negativeeffect on demand, with power infrastructure issues combining with cooler air,lessening demand for natural gas as a fuel for power generation.

Supply-sideconcerns are building, however, as the injection season draws closer to itstitular end on Oct. 31, with lackluster weekly injections anticipated as theresult of lingering cooling demand on resilient hot weather across largeportions of the country in both the upcoming six- to 10-day and eight- to14-day periods.

Thenear-term forecast looks to bring below-average temperatures to the Northeastand portions of the mid-Atlantic regions that could inspire some early heating,and average temperatures to the majority of the remaining portions of theeastern U.S., while above-average temperatures look to blanket the entire Westand portions of the central and Gulf regions.

Longerrange, in the eight- to 14-day period, above-average temperatures retake themajority of the country with only the Northeast expected to see averagetemperatures. Below-average temperatures are absent in the period.

Weeklynatural gas storage injections below historical averages through the bulk ofthe injection season resulted in a natural gas inventory at 3,600 Bcf as of theweek to Sept. 23. Coming in well below normal, the for the week eroded storageoverhangs to 90 Bcf above the year-ago level and 220 Bcf above the five-yearaverage of 3,380 Bcf, as it compared well below the 99-Bcf injection reportedfor the same week in 2015 and the five-year average injection of 97 Bcf.

Thisweek, an early survey of analysts and traders shows the expectation of anothercomparatively modest injection with consensus forming around a build in the low70s Bcf. This will compare against the 95-Bcf five-year average injection andthe 96-Bcf injection reported for the same week in 2015, suggesting additionalupside support as storage overhangs are trimmed further.

Addingto supply side woes, the latest production data showed gross wet gas productionin the U.S. slipped 0.5%, or 0.44 Bcf/d, to 87.41 Bcf/d in July from 87.84Bcf/d in June. Total U.S. gas production in July was 1.56 Bcf/d, or 1.8%, belowlevels reported in July 2015, the EIA said in its latest "Monthly CrudeOil and Natural Gas Production" report released Sept. 30.

Tradefor Tuesday product at the major delivery hubs in the U.S. was done in mixeddirections, as varied weather outlooks sent load projections both higher andlower.

Northeastdemand outlooks supported gains from the deflated values for gas deliverythrough the weekend at major hubs in the region. Transco Zone 6 NY deals weremore than 60 cents higher to an index above $1.00, while a gain of more than 50cents at Tetco-M3 sent the index there to near 90 cents. Conversely, benchmarkHenry Hub trading was done about 1 cent lower to an index around $2.80, whileWaha gave back nearly 5 cents to an index near $2.60. The Chicago market waspegged near $2.75 for a gain of about 5 cents. In the West, SoCal Border tradeswere about 1 cent higher to an index around $2.70, and PG&E Gate held nearunchanged at an index atop $3.25.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.