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November natural gas futures surge as weather suggests lingering cooling load

Novembernatural gas futures jumped back above key resistance at $3.00/MMBtu to post a$3.058/MMBtu intraday high, as warmer weather will blanket the country throughthe middle of October, keeping cooling load in play and preventing sharperinventory gains. The contract settled with a 7.7-cent gain at $3.041/MMBtu.

Weatherforecasts bolstered the support for natural gas futures as the latest revisionsto outlooks from the National Oceanic and Atmospheric Administration showabove-average temperatures for the entire country through Oct. 19.

Aswarm weather adds cooling demand during a period when typically demand foreither cooling or heating is shallow, natural gas inventory builds thatgenerally ramp higher through Oct. 31, the titular conclusion of the injectionseason, are expected to remain modest.

Analystsand traders looking ahead to the Oct. 6 release of inventory data covering theweek to Sept. 30, expect builds ranged widely from 62 Bcf to 80 Bcf, withconsensus formed at a 70-Bcf addition to stocks for the review week.

Themix of weather driving the storage expectation is reflected in degree day datathat shows there was 10.5% fewer cooling degree days compared to the same week lastyear, but 41.7% more than normal, while heating degree day data showed 5.9%more heating degree days compared to last year.

Abuild at this week's projected 70 Bcf would be an impressive step above the49-Bcf injection reported during the previous week that brought the totalworking gas supply to 3,600 Bcf. Still, it would lag well below the 95-Bcffive-year-average injection and the 96-Bcf build reported for the same week in2015.

Thetotal working gas supply would improve to 3,670 Bcf, while storage overhangswould be cut, with the year-on-five-year-average surplus sinking to 195 Bcf andthe surplus to the year-ago level cut to 64 Bcf.

Whiletemperatures outlooks supported the day's advance, the market shrugged off thepossible impact of a still developing weather event in the form of HurricaneMatthew. The Category 3 hurricane at 2 p.m. ET was 70 miles north-northeast ofCabo Lucrecia, Cuba, and about 70 miles south of Long Island, Bahamas. Thestorm was packing sustained winds of 120 mph as it traveled northwest at 12 mph.

Onthis track, Matthew will be moving across the Bahamas Wednesday and Thursdayand is expected to be very near the east coast of Florida by Thursday evening,the National Hurricane Center said. The storm is expected to make its way tocoastal areas of Georgia, South Carolina and North Carolina over the nextseveral days.

BehindMatthew, Tropical Storm Nicole was about 500 miles north-northeast of San Juan,Puerto Rico, and about 520 miles south-southeast of Bermuda. The storm waspacking winds of 50 mph as it moved west-northwest at 8 mph.

The hurricanecenter said a turn to the northwest is expected later Wednesday and a turn tothe north and northeast with a decrease in forward speed is forecast byThursday night.

Heavywind and rain associated with these types of systems generally result in lowerdemand as power infrastructure is impacted causing widespread customer outages.

Inday-ahead trade prices marched higher with support from demand and natural gasfutures' gains.

TranscoZone 6 NY transactions were about 1-cent higher to an index around $1.05,Tetco-M3 traded about 5 cents higher to an index near $1.00, and benchmarkHenry Hub trades were up about 5 cents to an index around $2.85. At Waha,trades were about 10 cents higher to around $2.70, while Chicago added about 5cents to an index around $2.80. At the SoCal Border, trades up about 5 cents onthe session brought the index to around $2.70, while PG&E Gate trades wereabout 5 cents higher to an index around $3.30.

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.