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November gas fails to hold overnight gains

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


November gas fails to hold overnight gains

Followinga 4.1-cent increase in the prior session to a finish at $2.964/MMBtu, Novembernatural gas futures attempted to move higher overnight ahead of the Wednesday,Oct. 5, open amid ongoing support from weather forecasts that look to drive bothearly heating and late-season cooling demand that will likely allow for acontinuation of the lackluster pace of storage-building. Whilerising to a $2.987/MMBtu overnight high, the front-month failed to hold thegains and drifted into shallow negative territory, last seen 0.7 cent down at$2.957/MMBtu.

UpdatedNational Weather Service outlooks show below-average temperatures gripping amajority of the Northeast, about half of the Mid-Atlantic and a patch of NorthCarolina in the upcoming six- to 10-day period, as average temperatures stretchover the southern tip of the Northeast into the balance of the Mid-Atlantic anda section of the Southeast. Above-average temperatures encompass the bulk ofthe country to span the entire West, central U.S. and the rest of the East inthe shorter-range period, before expanding to overtake the entire U.S. furtherout to the eight- to 14-day period.

Anear-term chill forecast for the Northeast supports anticipation of earlyheating demand, while lingering and prevalent above-average temperatureselsewhere in the country spell late-season cooling load.

Shouldthese weather-related demand scenarios materialize, natural gas would bediverted away from underground storage facilities to meet both heating andcooling demand, which should allow for yet another addition to the string ofsmaller-than-average weekly injections that has dominated the refill seasonthus far.

Inits latest inventory report, the U.S. Energy Information Administrationoutlined a 49-Bcfinjection for the week to Sept. 23 that extended the lacklusterpace of storage-building as it compared against the 97-Bcf five-year averagebuild and the 99-Bcf injection seen in the corresponding week in 2015. It tooktotal working gas stocks to 3,600 Bcf, trimming the year-on-five-year-averagesurplus to 220 Bcf and the year-on-year overhang to 90 Bcf.

Forthe next weekly storage report due out Thursday that will cover the week toSept. 30, market participants anticipate a 71-Bcf build on average, which wouldbe a step up from the week-ago injection but still below the 95-Bcf five-yearaverage addition to stocks and the 96-Bcf year-ago build. Anongoing slow pace of storage-building would further erode storage overhangs andlikely challenge end-of-season inventory projections currently pegged at arecord-high 4,042 Bcf, according to the EIA.

Thestreak of lackluster stock builds could be briefly interrupted, however, by alarger storage addition likely resulting from the Category 4 Hurricane Matthewpresently on track to move up the Eastern Seaboard. Heavy rainfall and strongwinds associated with the hurricane could damage power infrastructure and causewidespread outages that would clip gas demand for power generation before areturn to service and weather-related demand support further out allows for areprise of modest builds.

TheNational Hurricane Center last located Hurricane Matthew about 65 milesnorth-northwest of the eastern tip of Cuba and about 110 miles south-southeastof Long Island, Bahamas, packing maximum sustained winds of 125 mph as it movesnorthward at 10 mph, according to a 5 a.m. ET Wednesday update. Matthew isexpected to turn toward the north-northwest Wednesday, before turning towardthe northwest Wednesday night, just as the weather system is forecast to movethrough the Bahamas through Thursday and approach the east coast of Florida byThursday evening, the NHC said.

Incash trading, price action for natural gas booked for Wednesday flow was mixedwith a dominant upside bias, as varied demand expectations collided with anuptick at the futures arena.

Lookingat the key hubs, a near 5-cent advance steered Transco Zone 6 NY cash gas priceaction to an index at $1.043/MMBtu, as a better-than-3-cent uptick drove Chicagonext-day gas pricing to an average at $2.753/MMBtu. Conversely, an almost3-cent decline took benchmark Henry Hub spot gas price activity to an index at$2.833/MMBtu, as a scant less-than-1-cent reduction nudged PG&E Gate hubpricing to an average at $3.254/MMBtu.

Regionalindexes were aimed higher overall. Northeast day-ahead gas pricing was liftedby almost 8 cents to an index at $1.643/MMBtu, as Midwest cash gas priceactivity notched a 1-cent increase in deals averaging at $2.676/MMBtu. GulfCoast spot gas price action added roughly 5 cents on the session to average at $2.728/MMBtu,as West Coast next-day gas prices clawed up by less than 1 cent on average toan index at $2.568/MMBtu.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power and natural gas indexprices, as well as forwards and futures, visitour Commodities Pages.