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Hurricane Florence expected to dampen natural gas demand in US Southeast

Houston — Hurricane Florence, which is forecast to make landfall along the coast of North Carolina later this week, is expected to reduce natural gas demand across a wide swath of the southeastern US, although its current track makes it less likely that the storm will impact gas production or demand in the Appalachia region.

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As of Wednesday afternoon, the National Hurricane Center predicted that after making landfall, the storm will produce torrential rain that would inundate all of South Carolina, a large part of North Carolina, as well as parts Alabama, Tennessee, Kentucky and Virginia.

Although Florence is predicted to reach into southern West Virginia several days after making landfall, it is not expected to extend to the producing region in the north of that state.

DEMAND DESTRUCTION SEEN

Because of its strength -- Florence is on track to be the strongest hurricane to ever hit the US Southeast -- it is difficult to predict the storm's potential to cut gas demand in the region.

The most recent comparison to be made is Hurricane Arthur, which slammed into the North Carolina coast as a Category 2 storm in July 2014. During this storm, sample demand in North Carolina, South Carolina, Georgia and Virginia fell by a combined 1.8 Bcf/d between July 1 and July 4, 2014, to 3.4 Bcf/d, according to Platts Analytics data. Since most of this fluctuation in demand came from power plants, it's likely that the temperature drops seen during the storm resulted in lost demand for gas. In the four years since Arthur touched down, demand across North Carolina, South Carolina, Virginia and Georgia has increased, with total sample for the four states upwards of 6.3 Bcf/d over the last 30 days, offering more downside risk to demand.

UTILITY ADVISORIES

Gas utility companies across the Southeast issued advisories warning of possible outages of both gas and power in the region.

South Carolina Electric & Gas, which serves a 22,000-square-mile territory in South Carolina, said it plans to deploy about 2,900 personnel to respond to power outages following the storm.

In a statement, the SCANA subsidiary predicted that the storm would "bring dangerous winds and the potential for heavy rain and flooding across our service territory, which could result in significant power outages for our customers."

Piedmont Natural Gas, which distributes gas to more than 1 million residential, commercial and industrial customers and power plants in North Carolina, South Carolina and Tennessee, said it was launching its severe weather preparedness plan. The Duke Energy subsidiary issued a list of safety recommendations for customers who experience flooding or any other damage to their gas equipment or appliances as the result of Hurricane Florence.

PRICES

With Hurricane Florence still at sea Wednesday, gas prices remained largely unaffected by the storm, according to Platts pricing data.

With the US National Weather Service's track for Florence showing the storm taking a more southerly turn than previously forecast, the biggest price impact is likely to be seen in the Southeast and will likely come Thursday, when trades are made for delivery the following day.

Transco Zone 5 delivered, a Platts pricing point that runs through the Carolinas and Virginia, was unchanged at $3/MMBtu.

Florida Gas Transmission Zone 3 rose 6.5 cents to $3.04/MMBtu Wednesday.

On Friday, deals will be done for delivery through the weekend, a time when demand is typically lower than during the workweek. That consumption could be down even further due to the storm.

Price impacts from the storm are less likely to be felt in the Appalachian gas-producing region. Dominion South, an Appalachian pricing point that mostly tracks gas prices in West Virginia, was trading at $2.23/MMBtu Wednesday after falling 7 cents. -- Jim Magill, jim.magill@spglobal.com

-- John DeLapp, john.delapp@spglobal.com

-- Jason Lord, jason.lord@spglobal.com

-- Veda Chowdhury, veda.chowdhury@spglobal.com

-- Tyler Jubert, tjubert@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com