With the market monitoring the impending landfall of Hurricane Florence as it awaits the release of weekly government storage data, October natural gas futures were trading about 1.9 cents higher shortly after 8:30 a.m. ET Thursday at around $2.848/MMBtu.
In an 8 a.m. ET advisory, the National Hurricane Center (NHC) located Florence, which had fallen to Category 2 status, at about 170 miles east-southeast of Wilmington, NC, and said the storm was traveling northwest at about 12 mph.
“On the forecast track, the center of Florence will approach the coasts of southern North Carolina and eastern South Carolina in the hurricane warning area tonight and Friday,” the NHC said. “A slow motion over eastern South Carolina is forecast Friday night through Saturday night.
“Maximum sustained winds are near 110 mph with higher gusts. Little change in strength is expected before the center reaches the coast, with weakening expected after the center moves inland.”
Genscape Inc. analyst Nicole McMurrer told clients Thursday that Florence could have production impacts depending on its path as it pushes inland.
“Depending on Florence’s speed and track there could be major flooding in Ohio, West Virginia and western Pennsylvania, which could cause short-term shut-ins, or possibly longer term damage,” McMurrer said. “However, we do not have a preliminary estimate of potential production impacts because there have not been any other analogous storms in recent years to compare to. The nearest analog would be Hurricane Matthew, but that storm was weaker as a Category 1, hit much further south, and stayed primarily offshore.”
With uncertainties looming on Florence’s potential impacts, traders set their sights on a potentially below-average build from Thursday’s Energy Information Administration (EIA) storage inventory report.
A Bloomberg survey had a range of 59-76 Bcf, with a median of 65 Bcf. A Reuters survey of estimates ranged from 60-76 Bcf with a median of 68 Bcf. Bespoke Weather Services projected a 68 Bcf build, Kyle Cooper of IAF Advisors expected a 64 Bcf build, and EBW Analytics Group forecast a 69 Bcf build. Intercontinental Exchange settled Wednesday at a 65 Bcf injection.
Last year, 87 Bcf was injected into Lower 48 gas stocks, while the five-year average stands at 74 Bcf. As of Aug. 31, inventories stood at 2,568 Bcf, 20% below last year and about 19% below the five-year average, according to EIA.
“In our view, the main story remains the potential impact of Florence on demand for natural gas in the Southeast,” EBW CEO Andy Weissman said Thursday. “Additionally, damage to pipeline delivery service could occur. If current weather forecasts hold, demand destruction is likely to be extensive, triggering significant further selloff for natural gas.”
Weissman said unless the EIA injection “is well outside of the 64-70 Bcf range, the impact of the hurricane is likely to supersede any storage miss.”
October crude oil futures were trading about 86 cents lower at around $69.51/bbl, while October RBOB gasoline was trading about 1.3 cents lower at around $2.0222/gal.