Coming off a slump the week before, natural gas futures extended their losing ways through early afternoon trading on Monday. Market participants fixated on early signs of fall weather and robust supplies. Near-term heat, however, propelled cash prices.
Here’s the latest:
- September Nymex natural gas contract trading down 6.0 cents to $1.962/MMBtu at around 2:20 p.m. ET
- Market hangover from larger-than-expected U.S. Energy Information Administration (EIA) storage print endures
Beyond looming fall weather, excess supply fears remain the principal culprit for weaker futures.
For the week ended Aug. 16, EIA reported a 35 Bcf injection that increased inventories to 3,299 Bcf and kept stocks 13% above the five-year average. It exceeded the mid-20s Bcf build projected by major polls.
Early estimates submitted to Reuters for the week ended Aug. 23 ranged from injections of 20 Bcf to 53 Bcf, with an average increase of 36 Bcf. NGI modeled a build of 34 Bcf. That compares with a five-year average increase of 43 Bcf.
“The largest unknown factor that will come into play as we move forward will be the market expectations for the upcoming winter season and whether we will have a third mild winter,” Paragon Global Markets LLC’s Steve Blair, managing director of institutional energy sales, told NGI.
He noted that supply is stout in large part because of a benign winter nationally last season and mild conditions in some regions the season before.
- Wood Mackenzie estimates natural gas production on Monday at 101.5 Bcf/d, close to the 30-day average of 101.8 Bcf/d
- Feed gas demand from U.S. LNG terminals hovered around 13 Bcf Monday, in line with last week’s pace, per NGI data
Asian and European demand for American exports of liquefied natural gas steadied at solid levels in August, as both continents prepare for the coming winter. Europe’s stockpiles in storage are high – topping 90% of capacity. Yet Mobius Risk Group analysts noted that the continent’s capacity for stored gas may not be enough to weather a harsh winter, explaining why buyers there remain active.
“While healthy storage has helped allay some fears of swift supply-side shocks, Mother Nature remains the bloc’s primary risk factor for upside price action through winter,” the Mobius analysts said of Europe.
“Persisting heat waves across Asia are driving up gas demand, particularly in Japan and South Korea,” added Rystad Energy analyst Masanori Odaka.
- NGI’s Spot Gas National Avg. averaging $1.500 at midday, up 25.0 cents
- Florida Gas Zone 3 among leaders, rising 37.5 cents to $2.345, NGI’s MidDay Price Alert shows
After losing ground amid mild northern weather last week, cash prices rebounded on Monday. The physical market got a big boost from a fresh bout of extreme heat.
NatGasWeather said forecasts for this week advertised “very strong demand” as “hot high pressure expands to rule most of the southern two-thirds of the U.S. with highs of upper 80s to 100s. This includes Chicago experiencing highs of 90s” today and Tuesday. “Power burns will be very strong.”
However, the firm added, “national demand is still expected to ease” next week “as the northern half of the U.S. becomes near perfect with highs of upper 60s to 80s as weak weather systems track through.”
