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October Natural Gas Called Slightly Higher as HDDs Build in Outlook

The October natural gas futures contract was trading about 0.7 cents higher at around $2.821 shortly after 8 a.m. ET Tuesday as forecasters pointed to glimpses of fall heating demand showing up in the outlook toward the end of the month.

NatGasWeather observed hotter trends in the overnight guidance for the second half of next week, including “very warm high pressure setting up over the southern U.S., focused on the Southeast.

“The data was then colder across the northern U.S. around the start of October,” which could add heating degree days (HDD) “as stronger cool fronts finally begin pushing across the Canadian border,” the firm said, noting that the European model was showing less projected demand versus the Global Forecast System.

“...Overall, the coming pattern has added a little more demand in recent days, although it would be more impressive if it wasn’t for Lower 48 production setting yet another record high. No major changes overall as deficits will remain well above 500 Bcf for many more weeks to come, potentially through early November, keeping the background state bullish to counter bearish production trends.”

Bespoke Weather Services similarly pointed to the potential for the market to see “the first real heating demand of the fall season” in the form of a cold shot expected in the final weekend of the month, around Sept. 29-30.

“This comes a little earlier than is typically bullish on a net demand basis, and on net demand, forecasts actually look about the same as they did yesterday,” Bespoke told clients Tuesday. “However, these cold risks should result in at least some HDD additions as we move into early October as well, and they could easily spook a market with low storage levels that was looking for very large injections into October as cooling demand was expected to leave the market.”

The anticipation of a “deluge of Appalachian supply in the coming weeks,” including the prospect of new capacity from projects like Atlantic Sunrise and Nexus Gas Transmission by the start of the heating season, has helped pressure futures lower across the winter strip, global consulting firm Energy Aspects told clients in a recent note.

“After hitting weekly production records every week since late July, Appalachia receipts stagnated somewhat at the start of September,” Energy Aspects said. “Receipts of 29.5 Bcf/d in the region were up by just 0.1 Bcf/d” week/week (w/w) as of late last week, “after the week ending Sept. 7 saw regional receipts fall by 0.1 Bcf/d w/w.”

The firm attributed some of the slowdown in growth to maintenance on Leach XPress and to the recent explosion on an Energy Transfer Partners LP gathering system in western Pennsylvania.

“Even with this recent stagnation, Appalachia output of 29.4 Bcf/d so far in September is still up 0.6 Bcf/d month/month and 5.0 Bcf/d year/year” from new infrastructure additions, including the start-up of Rover’s Majorsville and Burgettstown laterals, which “mark two steps forward to push past the recent one step back.”

October crude oil futures were trading about 89 cents higher at around $69.80/bbl, while October RBOB gasoline was up about 3 cents to around $2.0073/gal.

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