Natural gas futures fall further as market braces for potential triple-digit storage injection

Natural gas futures floundered for a second straight day on Friday as markets continued to digest a bearish storage report, impending fall weather and an averted railroad strike that could have rumbled supply chains and wreak havoc on the US economy. The Nymex natural gas futures contract for October settled at $7.764/MMBtu, down 56.0 cents per day. A day earlier, the fast month fell 79.0 cents.

In short :

  • The fast month falls on the second day
  • Production holds steady near 2022
  • The interior offer ready to inflate

The November futures contract fell 56.1 cents to $7.811 on Friday.

NGI’s Spot Gas National Avg. fell 62.5 cents to $7,040, falling alongside the broader selloff.

Warmer temperatures over the coming week, including highs in the 80s in the Midwest and East, are expected to boost strong seasonal cooling demand at times, NatGasWeather said. However, the company also expects greater wind power generation and shorter afternoon heat peak durations compared to July and August, a reminder that the fall weather is fast approaching. not.

“Overnight data maintained light national demand from September 23-30 as high pressure weakens and moves westward as weather systems with comfortable highs of 60-80 arrive in the eastern half of the United States,” NatGasWeather said on Friday.

The company noted that the latest guidance followed news on Thursday that negotiators had avoided a walkout by railway workers which, in addition to wider economic implications, could have disrupted coal deliveries and increased demand for natural gas. The threat of a strike had boosted futures on Wednesday, but after being pushed back, natural gas markets gave up those gains.

Meanwhile, production held steady at nearly 100 billion cubic feet per day on Friday and for most of last week – a striking distance from a 2022 peak. With production up in September and mild temperatures likely later this month and into October, “fundamentals could loosen further – creating the risk of another leg lower” for futures, said Eli Rubin, senior analyst at EBW Analytics Group .

He also noted that while global calls for LNG are robust and expected to remain so, with Europe and Asia competing for U.S. exports ahead of winter, the near-term capacity of U.S. exploration and of production to meet this demand is about to last a second noticeable jolt.

The liquefied natural gas export plant at Cove Point in Maryland is scheduled for maintenance next month, which will temporarily reduce superchilled fuel shipments. This follows the idling of the Freeport LNG terminal in Texas after a fire in June. Freeport is expected to restart partial operations in November, with full operations back online in March.

The combination of approaching cooler weather, higher production and more natural gas to consume domestically amid export blackouts could lead to plump storage injections in the weeks ahead. That would likely put downward pressure on prices, Rubin noted.

Upcoming inventory gains?

The Energy Information Administration (EIA) on Thursday announced an injection of 77 billion cubic feet into US natural gas storage for the week ended September 9. the low Bcf of the 70s.

Lower 48 total storage ended the period at 2.771 billion cubic feet. That put stocks 11% below the five-year average, but the result indicated the trajectory of supply starting to outpace demand.

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Adjusting for weather conditions, the market was oversupplied by 1.4 Bcf/d in the last EIA reporting period, compared to an undersupply of 0.4 Bcf/d the previous week, according to Tudor estimates. Pickering, Holt & Co. (TPH).

Recent data shows that production growth is exceeding TPH modeling, driven by higher volumes from Haynesville shales, Eagle Ford shales and the Anadarko Basin.

“We’ve been somewhat skeptical given that implied flows based on EIA-reported injections suggest lighter flows, but data points since the start of the week have tended to approach our projections for September. in the range of 98.8,100 m3/d,” the TPH said. analysts said of the production.

Ahead of the EIA’s next storage report, covering the week of September 16, early estimates submitted to Reuters ranged from injections of 73 billion cubic feet to 102 billion cubic feet, with an average increase of 83 billion of cubic feet. That compares to an injection of 77 billion cubic feet in the same week last year and a five-year average of 81 billion cubic feet.

Analysts at The Schork Report echoed several participants on online energy platform Enelyst, who predicted the second triple-digit storage print of the season. Schork analysts are bracing for a rise at the top end of early polls, calling for a “monster injection”.

If that happens and normal fall weather ensues, it could put the market on track for the EIA’s end-of-season storage target of 3.4 Tcf – a healthy level, they said. they stated.

Spot price clunk

On Friday, natural gas spot prices also surged on a second day amid relatively mild weather and expectations of comfortable conditions through the weekend.

Declines in the Midwest and West pushed the national average down.

Chicago Citygate fell 72.5 cents a day to an average of $6,940. Elsewhere in the central United States, Joliet fell 70.5 cents to $6.915 and Consumers Energy lost 65.5 cents to $7.055.

Out West, Malin fell 72.0 cents to $6,910 and SoCal Border Avg. plunged from $1.115 to $7.045.

NatGasWeather forecast highs of 60 to 80 over much of the country to start the week ahead.

The firm expects warmer exceptions in the 90s in Texas and the Southwest, however, and as the week progresses the eastern two-thirds of the lower 48s are expected to warm above normal with highs of 70 to 90.

The west coast could see milder spells as weather systems arrive with showers and highs of 60 to below 80, NatGasWeather noted.

Regarding the last week of September, the company added that “the western United States will be mild and rainy at first, then turn very hot as high pressure arrives.” The eastern half of the country “will be very warm at first, then become comfortable” as rains and cooler air enter the region.

“The longer-term model favors near-normal temperatures over most of the United States for October, which for this time of year means low demand due to a combination of low demand heating in the northern United States and a slight late-season cooling in the south. United States,” the forecaster said.

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