October natural gas futures pulled back early gains while holding positive ground Tuesday as the market tried to gauge the impact of Tropical Storm Francine, which could make landfall in Louisiana Wednesday as a Category 2 hurricane.
Here’s the latest:
- The prompt month contract up 7.1 cents to $2.241/MMBtu as of 2:45 p.m. ET after trading to an intraday high of $2.258
- Tropical Storm Francine in the Gulf of Mexico (GOM) is seen slowly moving north-northeast from the southern tip of Texas and make landfall in Louisiana on Wednesday
- Major producers evacuating offshore production platforms; LNG facilities preparing for storm’s landfall
The National Hurricane Center (NHC) said Francine could produce life-threatening storm surges, damaging hurricane-force winds and heavy rainfall, potentially causing flash flooding from Texas to Mississippi through Friday.
The risk from Francine to liquefied natural gas facilities in Texas was lower on Tuesday. Still, as the storm was expected to make landfall near Cameron, LA, the threat to LNG export plants there remained. Sempra Infrastructure’s Cameron LNG, Venture Global LNG Inc.’s Calcasieu Pass LNG and Tellurian Inc.’s Driftwood LNG development were within the storm’s potential path.
Feed gas deliveries to domestic LNG facilities dropped to 12.94 Bcf/d Tuesday versus 13.34 Bcf/d Monday, NGI’s U.S. LNG Export Flow Tracker showed.
Meanwhile, natural gas production slid 2.5% day/day to 99.0 Bcf/d, according to Bloomberg.
The lower demand expectations “very likely overshadowed any lost production volumes due to personnel evacuations from offshore wells,” Pinebrook Energy Advisors Andy Huenefeld, managing partner, said. He noted that only 2-3% of domestic natural gas was sourced from offshore GOM.
- Warm weather continues to support cooling demand, but cooldown expected
- Natural gas storage surpluses seen decreasing with comparatively small injections
While Francine’s potential impacts cast a pall over the market, the tightening supply/demand balance supported Tuesday’s gains.
NatGasWeather said demand would be moderate through the remainder of this week. Temperatures in the 60s to 80s were expected to rule in the East, “aided by cooling rains into the South from Francine.” Conversely, much of the West and Central United States would be “very warm to hot” with highs of upper 80s to 100s.
Temperatures were forecast to warm to above-normal over most regions next week, the firm said. “Perfect highs” of upper 60s to 80s were expected across the North for light national demand, while the South would likely remain “very warm to hot” with highs of mid-80s to 100s.
The result of the weather patterns was expected to reduce storage surpluses to around 250 Bcf after the next four U.S. Energy Information Administration (EIA) storage reports.
EIA was expected to report a comparatively small injection in its Thursday report covering the first week of September. Preliminary estimates submitted to Reuters averaged 49 Bcf, in line with NGI’s forecast. That compared with a five-year average increase of 67 Bcf.
After a storage build of 13 Bcf reported for the week ended Aug. 30, natural gas stocks stood at 3,347 Bcf. The surplus to the five-year average slipped from 12% to below 11%.
- NGI’s Spot Gas National Avg. slips 5.0 cents to $1.580, according to MidDayPrice Alert
- Waha hub price average sinks $1.320 to negative $2.040
Cash prices across West Texas were under pressure as temperatures were expected to hold in the low- to mid-80s through midweek, according to the National Weather Service. Temperatures could climb back into the lower 90s into the weekend.
