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November natural gas ends session well off early highs

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Essential Energy Insights - September 17, 2020

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November natural gas ends session well off early highs

Early gains to a $3.026/MMBtu intraday high proved unsustainable Tuesday, Oct. 17, as NYMEX November natural gas futures slipped to a settlement just 1.6 cents higher at $2.962/MMBtu.

Weather forecasts that call for a mix of above-average and below-average temperatures across the country through the end of October supported market gains, while the extent to which the weather will support demand for natural gas remains questionable, keeping the market teetering within its recent trading range.

"Based on the latest round of short term temperature forecasts it does not look like there is going to be much of a call on Nat Gas for heating related demand in the month of October," Energy Management Institute principal Dominick Chirichella said.

"Although there will be lingering demand for cooling related Nat Gas demand it will not be enough to offset the loss of normal October heating related demand," he said.

The latest revisions to the six- to 10-day weather maps from the National Weather Service show above-average temperatures blanketing nearly the entire country. Only a portion of Texas is called to see below-average temperatures through the period.

Longer range, the eight- to 14-day outlook shows the area of below-average temperatures expanding north and east to encompass portions of the east central, Gulf Coast and Southeast. The remainder of the country will remain under above-average temperatures.

Natural gas inventories should continue building in the remaining weeks of the titular injection season, which runs from April 1 through Oct. 31.

A slow rate of storage building through the season thus far has resulted in a natural gas inventory of 3,595 Bcf, trailing the year-ago level by 153 Bcf and the five-year average by 8 Bcf.

The season is projected to end with a total working gas supply near the five-year average even as weekly injections to the natural gas supply are expected to slow from a recent ramped-up pace.

The U.S. Energy Information Administration reported a net 87-Bcf injection into natural gas inventories in the week to Oct. 6, while forecasts for the upcoming storage report due out at 10:30 a.m. ET on Thursday, Oct. 19, span the 50s Bcf for the week to Oct. 13.

The build will compare against a five-year-average injection of 78 Bcf and the 77-Bcf injection reported in the same week in 2016.

Mixed weather that generated a combination of cooling and heating demand through the review week to Oct. 11, included in this week's natural gas inventory assessment, supported total U.S. consumption of natural gas higher by 7% compared with the previous report week, the EIA said in its Natural Gas Weekly Update. Natural gas consumed for power generation climbed by 12% week over week, industrial-sector consumption decreased by 2%, and residential- and commercial-sector consumption increased by 18%.

Looking ahead, analysts' early projections for inventories in the weeks ended Oct. 20 and Oct. 27 are seen in the upper 60s Bcf and mid-70s Bcf, respectively.

The price of natural gas moved in the day-ahead markets varied.

Prices came down in the Northeast amid easing demand. Transco Zone 6 NY gave back about 5 cents to an index below $2.80 and Tetco-M3 shed about 20 cents to an index below $1.50. At the Henry Hub and Chicago, trades were about 1 cent lower to index below $2.90 and below $2.80, respectively. Waha bucked the downside with heat helping to support trades nearly 10 cents higher to an index atop $2.60. Trades at the SoCal Border were about 5 cents lower to an index near $2.90, while PG&E Gate added nearly 15 cents to an index atop $3.30.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.