Natural gas futures rocketed higher early Wednesday as supply concerns continued to grip the market. The October Nymex contract was up 17.4 cents to $5.434/MMBtu at around 8:45 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

The continued gains in Henry Hub futures coincide with rallying prices overseas and storage adequacy concerns both at home and abroad, according to Bespoke Weather Services. There remains significant running room before the market would begin to price out liquefied natural gas (LNG) exports in the event of a supply crunch, the firm said.

“Natural gas prices are (surprise, surprise) up sharply this morning, seemingly piggybacking off European prices, which have been up more than 10% so far today,” Bespoke told clients in a note early Wednesday. “…It is all fear in the market, owing to storage levels that are viewed as less than sufficient in the event of a cold winter, not just here in the U.S., but even more so over in Europe.

“It makes it very difficult to say when this rally could end, or how high we can go, as we have tons more upside potential if the market begins to worry more about the possibility of having to price out LNG this winter.”

In the near term, Tropical Storm Nicholas appears to have had at least some impact on LNG export operations, according to Wood Mackenzie. On Tuesday the firm notified clients when it observed evidence that all three trains at the Freeport LNG facility had turned off.

“Power outages are the most likely culprit,” Wood Mackenzie analyst Kara Ozgen said, noting that the local power outage rate near the Freeport terminal “reached 75% yesterday morning. Also supporting this idea was Centerpoint Energy’s outage map, which showed that there were power outages in the same area where Freeport LNG is situated.”

Nicholas was moving slowly over “extreme southeastern Texas” as a tropical depression early Wednesday, according to the National Hurricane Center. The storm was expected to continue on a “slow eastward motion” Wednesday “followed by a stall and very slow movement on Thursday.”

Nicholas was expected to weaken steadily before dissipating Thursday night or Friday, forecasters said.

“As expected, Nicholas brought a significant amount of power outages to Texas, with the peak reaching about 500,000 customers,” Wood Mackenzie’s Ozgen said. However, by Tuesday evening utilities appeared to have “already resolved a majority of the issues.”

As for Louisiana, still feeling the effects of Hurricane Ida, Nicholas “may tack on some more outages or delay current restorations,” but damages “will most likely be minimal compared to Ida since it will be moving along as a depression today,” the analyst added.

Meanwhile, looking ahead to Thursday’s U.S. Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 74 Bcf build for the week ended Sept. 10.

This week’s report “will begin the string of more robust shoulder season injections,” Energy Aspects said in a note to clients, adding that a drop in national cooling degree days and “high cash prices lead to a 5 Bcf/d week/week decline in gas-fired electricity generation” for the report period.

October crude oil futures were up $1.23 to $71.69/bbl at around 8:45 a.m. ET.