After extending 2.1 cents lower in the prior session to settle at $2.895/MMBtu, NYMEX November natural gas futures revisited the upside overnight ahead of the Wednesday, Oct. 4, open, in technical buying and with lingering weather support. At 7:10 a.m. ET (1110 GMT) the contract was 2.3 cents higher at $2.918/MMBtu.
November gas has been tethered to the downside since its debut in the lead slot on Sept. 28, accumulating a 16.6-cent decline over a four-day losing streak. Renewed buying amid sentiment of oversold conditions are beginning to inspire fresh gains for the contract, backed fundamentally by forecasts for stubborn summer-like conditions in the eastern U.S.
Heat continues to grip major cooling markets in the midrange outlooks, suggesting elevated power-sector demand for natural gas as utilities work to meet cooling requirements and limited injections to storage in the coming weeks.
National Weather Service projections show above-average temperatures encompassing nearly the entire eastern third of the country and parts of the Southwest in the upcoming six- to 10-day period, before pulling back from a few areas of the Southeast but spilling into portions of the north-central U.S. and ultimately remaining dominant over the eastern half of the U.S., as well as shifting and expanding in scope in the Southwest, further out to the eight- to 14-day period. Average to below-average temperatures settle elsewhere in the country.
Warmer weather over the eastern U.S. is already expected to have bolstered demand for natural gas and helped keep a lid on the rate of weekly storage injections when the U.S. Energy Information Administration releases its next inventory report at 10:30 a.m. ET on Thursday, Oct. 5, for the week ended Sept. 29. Preliminary estimates call for a build in the low 50s Bcf.
In the week to Sept. 27, much of which will be reflected in the upcoming storage report, a 9% week-on-week gain in power burn amid warming in the East combined with an 11% increase in residential/commercial-sector demand encouraged by a cool-down in the West to drive a 6% uptick in total U.S. gas consumption, according to the EIA's latest "Natural Gas Weekly Update."
The forthcoming storage data would follow the 58-Bcf injection in the week to Sept. 22 that took natural gas inventories to a total of 3,466 Bcf, or 127 Bcf below the year-ago level and 41 Bcf above the five-year average of 3,425 Bcf. Although above the 49-Bcf build seen in the corresponding week in 2016, this reported injection was below the full range of estimates coming into the day and the 84-Bcf five-year-average addition to stocks.
Looking at the tropics, the National Hurricane Center is currently monitoring two weather disturbances for cyclone formation, as of a 2 a.m. ET advisory on Oct. 4. Disturbance-1 is associated with a broad low-pressure area over the southwestern Caribbean Sea, with a 70% chance of formation over the next 48 hours and an 80% chance over the next five days. It is expected to become a tropical depression in the next few days. Disturbance-2 is a trough of low pressure located over central Cuba and extending northward into the Straits of Florida. Given only a 10% chance of formation over the next five days, significant development of this system is not expected.
At the cash market, weather and demand outlooks encouraged choppy price activity for next-day natural gas on Tuesday.
Looking at the key delivery locations, a near 61-cent increase steered Transco Zone 6 NY day-ahead gas price action to an index at $2.462/MMBtu, as an almost 4-cent uptick nudged PG&E Gate spot gas pricing to an average at $3.076/MMBtu. Conversely, a better-than-9-cent decline took benchmark Henry Hub cash gas price activity to an index at $2.727/MMBtu, as a roughly 7-cent reduction brought Chicago hub pricing to an average at $2.557/MMBtu.
On a regional basis, Northeast next-day gas price activity rose by nearly 7 cents to an index at $1.927/MMBtu, as West Coast cash gas prices retreated by 4 cents on average to an index at $2.250/MMBtu. Gulf Coast spot gas price action gave back about 1 cent to average at $2.645/MMBtu, as Midwest day-ahead gas pricing notched a marginal less-than-1-cent gain in deals averaging at $2.477/MMBtu.
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