Houston — The NYMEX November natural gas futures contract jumped 12.4 cents and settled at $3.267/MMBtu Monday as Hurricane Michael is forecast to make landfall on the northeastern US Gulf Coast midweek.
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The front-month contract traded between $3.174/MMBtu and $3.294/MMBtu in the session.
"These prices indicate that any kind of news can be deemed bullish and when it is about a storm, it is really bullish," said John Woods, president of JJ Woods Associates. "The developing storm in the Gulf Coast has spooked out market participants."
The National Hurricane Center said that Michael is expected to be near or at hurricane strength when hits the northeastern US Gulf Coast on Tuesday night or Wednesday.
Forecast projections put the Florida Panhandle, parts of Alabama, Georgia, the Carolinas and Virginia in the storm's path. Heavy rains from Michael could produce life-threatening flash floods from the Florida Panhandle and Big Bend region into portions of Carolinas through Thursday.
Production lags in recent days and historically low national gas stocks also are likely driving up prices.
US dry gas production is set to decline by 300 MMcf to 82.9 Bcf Monday, according to S&P Global Platts Analytics data. Output is likely to stay relatively flat over the next seven days.
Demand could decline over the next seven days, likely from storm-driven temperature dips and declines in utility gas burns. Total US demand dropped since the start of the weekend because of heating demand in the Northeast and Upper Midwest falling 3.3 Bcf since Friday to 75.9 Bcf Monday, data showed.
But heating demand may rise, with the National Weather Service calling for a likelihood of below-average temperatures across much of the US over the next six to 10 days.
Platts Analytics estimates showed that over the next seven days, demand is likely to climb to average 77.5 Bcf/d.
The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
-- Veda Chowdhury, firstname.lastname@example.org
-- Edited by Annie Siebert, email@example.com