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September gas attempts gains overnight amid technical pressure

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Essential Energy Insights - October 2021


September gas attempts gains overnight amid technical pressure

After ending the week's opening session down 2.4 cents at $2.959/MMBtu, NYMEX September natural gas futures notched gains overnight, before returning to the negative side of the ledger ahead of the Tuesday, Aug. 15, open, with the upside supported by weather outlooks but limited by technical selling. At 6:45 a.m. ET, the contract was 2.5 cents lower at $2.934/MMBtu, while trading in a range from $2.940/MMBtu to $2.972/MMBtu.

Front-month gas has extended pre-weekend losses into the start of the current workweek, as the market considered recent gains garnered in a four-day winning streak from Aug. 7 through Aug. 10 to have been overdone.

Despite technical pressure, however, weather support is keeping the market afloat, as temperature forecasts continue to reflect warmer conditions across the bulk of the country that should ramp up cooling demand and allow for a continuation of the subdued pace of storage building.

Updated National Weather Service projections show above-average temperatures engulfing a majority of the country's eastern two-thirds and portions of the West through both the six- to 10-day and eight- to 14-day periods. Below-average temperatures hold over a section of Washington state in the shorter-range view but disappear from the longer-range view, as average temperatures settle over a small area of the south-central U.S. and much of the West before shifting in scope to encompass just portions of the Northwest and a larger area of the south-central U.S.

The prevalence of heat across the major cooling east and central regions should boost power-sector demand for natural gas, as utilities are called upon to meet customer cooling load, thereby limiting the amount of natural gas available to be moved into underground storage.

Natural gas inventories have been building at a lackluster rate thus far in the refill season, with net storage injections so far in the rebuilding season reaching only 987 Bcf, versus the five-year average of 1,191 Bcf over the same period.

The latest storage data from the U.S. Energy Information Administration has outlined a 28-Bcf build for the week ended Aug. 4 that bested the 24-Bcf injection in the prior year but trailed the 54-Bcf five-year-average addition. That took total working gas stocks to 3,038 Bcf, or 275 Bcf below the year-ago level and 61 Bcf above the five-year average of 2,977 Bcf.

Storage levels are expected to exceed 3,900 Bcf by the end of October, a level at par with the five-year average. A slower-than-normal rate of weekly injections, however, could threaten expectations for healthy stocks to start the heating season.

Also providing a backdrop of concern for the market, the hurricane season continues to pick up pace, with the National Hurricane Center currently monitoring three weather disturbances.

Gert has strengthened to hurricane status as of 11 p.m. ET on Monday. It was last seen about 445 miles west of Bermuda, packing maximum sustained winds of 75 mph as it moves north at 8 mph. It is expected to turn northeast with an increase in forward speed into late Tuesday and to strengthen over the next 48 hours.

In addition, an area of low pressure that was last situated several hundred miles west-southwest of the Cabo Verde Islands as of 8 p.m. ET on Monday is given a 30% chance of formation within the next 48 hours and a 60% chance over the next five days, and a tropical wave over western Africa expected to emerge into the far eastern Atlantic Ocean in about two days is given a 20% chance of development over the next five days.

In cash trade, generally supportive demand expectations encouraged the upside to prevail in price action for natural gas moved Monday for Tuesday flow.

Among the key delivery locations, the charge higher was led by Transco Zone 6 NY spot gas price activity that added almost $1.21 on the session to average at $2.989/MMBtu. Benchmark Henry Hub next-day gas pricing followed with a roughly 6-cent advance to an index at $3.020/MMBtu, then Chicago day-ahead gas prices that were bolstered by about 2 cents on average to an index at $2.880/MMBtu. Defying the wider uptrend, PG&E Gate hub action notched a near 2-cent slump in deals averaging at $3.287/MMBtu.

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Regional averages were stronger overall. Cash gas prices in the Northeast rose by around 37 cents on average to an index at $2.460/MMBtu, as spot gas price action in the Gulf producing region logged a 4-cent gain in trades averaging at $2.884/MMBtu. Next-day gas price activity in the Midwest climbed by almost 2 cents to an index at $2.768/MMBtu, as day-ahead gas pricing in the West tacked on roughly 1 cent to average at $2.563/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.