Coming off Tuesday’s sharp rally, October natural gas futures were trading close to even shortly after 8 a.m. ET Wednesday at around $2.930/MMBtu, with forecasters pointing to additional long-range cold in the overnight guidance.
Bespoke Weather Services added to its long-range heating demand expectations based on the overnight data for late September and early October, enough to produce “solidly above average” gas-weighted degree days (GWDD) during the period.
“We still see GWDDs running far above average the next couple of weeks, though much of that is thanks to short-term heat that stays strong, only gradually easing into next week...power burns continue to run extraordinarily tight and lingering heat means we can expect to see cash strength yet again today,” Bespoke told clients Wednesday.
“These tight burns have us expecting a cash-led bounce up towards $2.95 this morning, with the possibility of $2.98 potentially being in play...though $2.98 resistance seems quite likely to hold today, and we are still looking for for prices to reverse moving forward.”
Physical prices at Transco Zone 5 have surged the past two trading days, climbing to $3.38 Tuesday. According to Genscape Inc. analyst Josh Garcia, this coincides with the recovery of Mid-Atlantic natural gas demand following the landfall last week of former Hurricane Florence.
Aggregate demand in Virginia and the Carolinas set a new month-to-date high at just above 5 Bcf/d Tuesday after falling to a low of 3.48 Bcf/d on Saturday, which compares to demand averaging 4.4 Bcf/d month-to-date prior to the storm, according to Garcia.
“Several nuclear plants remained offline due to weather or coinciding maintenance, which was one of the bullish factors that caused Transco Zone 5 basis to strengthen,” Garcia said.
Meanwhile, the heavy rains Florence delivered to parts of Appalachia and the Mid-Atlantic could pose some risks for pipeline infrastructure, Garcia added.
Genscape’s infrastructure team said during the week of Sept. 8-14, Nexus Gas Transmission “had up to 4.9 inches of rain from the remnants of Gordon, with Florence coming through just a week later,” the analyst said. “This could pose risks to infrastructure timelines in the Northeast, but it is too early to definitely tell if specific projects will be delayed due to the rain.”
Looking at the technicals, even after Tuesday’s swift rally to break through resistance, bulls still have some work to do, said ICAP Technical Analysis analyst Brian LaRose.
“With natural gas blowing through $2.873-2.879...the bulls can argue $2.752 marked a more significant low,” LaRose said. “If this is the case, they should have little trouble getting through what is left of resistance. They have two obstacles to clear, $2.941-2.951-2.957 and $3.027-3.041. We still see the risk of revisiting the $2.700-2.600 neighborhood if they cannot lift natural gas over these levels.”
October crude oil was trading about 11 cents lower Wednesday morning at around $69.47/bbl, while October RBOB gasoline was down fractionally to around $2.0011/gal.