October natural gas futures were trading close to even Monday morning at around $2.779/MMBtu as forecasters noted only small adjustments to the outlook based on weekend guidance.
Weekend weather data came in slightly cooler for late this week but slightly warmer for the Sept. 16-18 period, according to NatGasWeather.
“The pattern still looks exceptionally comfortable across most of the country Sept. 19-25 but with the potential for the first cool shot of the season arriving across the Midwest and Northeast around Sept. 20. Overall, we view the data as little changed” because the coming pattern should produce “light demand as we advance deeper in the shoulder season and where weekly storage builds should finally come in larger than five-year averages to gradually improve hefty deficits.
“...We are expecting several builds in the 90s Bcf over the coming month, potentially 100-plus Bcf, something that hasn’t occurred the past two fall seasons,” the firm said. “Sentiment last week rapidly transitioned to bearish...on expectations of larger builds after this week’s report, as well as from Lower 48 production setting new record highs. But how much lower are the markets willing to let prices go with deficits expected to remain above 500 Bcf for quite some time? Early week trading should offer clues.”
Meanwhile, the markets will be watching Hurricane Florence this week as it tracks toward the southeastern United States.
As of early Monday, Florence was located about 625 miles southeast of Bermuda and traveling west-northwest about 9 mph, according to the National Hurricane Center (NHC).
“A turn toward the northwest is forecast to occur Wednesday night or Thursday,” the NHC said. “On the forecast track, the center of Florence will move over the southwestern Atlantic Ocean between Bermuda and the Bahamas Tuesday and Wednesday, and approach the southeastern coast of the United States on the Thursday.
“...Rapid strengthening is forecast, and Florence is forecast to become a major hurricane this morning, and is expected to remain an extremely dangerous major hurricane through Thursday.”
NatGasWeather said Florence could impact demand through showers, cooling and power outages while also potentially causing delays for liquefied natural gas exports.
“Impacts on production are less certain, but likely limited,” the firm said.
Looking at the technicals, ICAP Technical Analysis analyst Brian LaRose said he’s “not seeing much in the way of bottoming action” for natural gas.
“However, downside momentum is waning and key support is being tested,” LaRose said. “So I would not rule out the possibility of some sideways to higher price action to start the week. That being said, a bounce is not necessary, nor required. If the bulls are unable to promptly pull natural gas out of this tailspin the door will be open for a drop to $2.644-2.642.”
October crude oil futures were trading about 46 cents higher at around $68.21/bbl, while October RBOB gasoline was trading about 1.5 cents higher at around $1.9855/gal