A disruptive storm building strength over the Gulf of Mexico (GOM) and upcoming government storage data gave natural gas futures traders plenty to ponder heading into Thursday’s regular trading hours. The August Nymex futures contract was up 2.6 cents to $2.470/MMBtu shortly after 8:30 a.m. ET.
The latest guidance was mixed as of early Thursday, according to Bespoke Weather Services. The forecaster noted cooler changes for early next week because of impacts from the tropical system over the GOM, which would be called Barry on reaching named storm status.
“The 11-15 day, conversely, was adjusted a little hotter, leaving us with total forecast” gas-weighted degree days “the same as what we had yesterday,” Bespoke said. As for balances, “production is notably lower this morning, some of which is due to the sutting in of Gulf of Mexico production in advance of the tropical system.” Liquefied natural gas (LNG) export numbers were also around 0.75 Bcf lower, “possibly related to the storm as well.”
The National Hurricane Center in its 8 a.m. ET advisory Thursday said the disturbance was strengthening and forecast to become a tropical depression or a tropical storm later in the day, and it could become a hurricane by late Friday.
The system, with maximum sustained winds around 35 mph, early Thursday was about 115 miles south-southeast of the mouth of the Mississippi River and 225 miles southeast of Morgan City, LA, moving west at 5 mph. A west-northwest motion was expected on Friday followed by a northwestward track by early Saturday.
“On the forecast track, the system is expected to approach the Louisiana coast this weekend,” the forecaster said.
The storm surge was expected to be three-to-six feet. A storm surge watch was in effect for the mouth of the Pearl River to Intracoastal City, LA, and a hurricane watch was in effect for the mouth of the Mississippi River to Cameron, LA. Total additional rain accumulations were estimated at 10-15 inches near and inland of the central Gulf Coast through next week, with isolated rainfall of 20 inches.
Many eastern GOM producers as of Wednesday had evacuated more than a dozen platforms, with close to 18% of natural gas production and 32% of oil output shut in, according to the Bureau of Safety and Environmental Management.
However, the biggest impact may be to the onshore, including several refinery complexes in Louisiana, according to Tudor, Pickering, Holt & Co. (TPH).
“The storm is bringing considerable rain to an area that already features high water levels on the Mississippi River,” TPH analysts said in a note Thursday. “Although we have not heard of any closures yet, five out of our eight covered names have refineries in Louisiana and face potential exposure to the storm.”
Valero Energy Corp. “has an estimated 26% of its capacity in the storm path” with its Meraux and St. Charles, LA, facilities, as well as the one in Port Arthur, TX, analysts said.
Delek US Holdings Inc.’s Krotz Springs, LA, has an estimated 25% capacity, while Phillips 66’s Louisiana facilities in Alliance and Lake Charles have 23%. PBF Energy’s Chalmette, LA, facility is another 21%, while Marathon Petroleum Corp.’s Garyville, LA, plant has an estimated 18%.
The storm also puts LNG operations at risk, according to Genscape Inc. Neither Cheniere Energy Inc. nor Sempra Energy as of early Thursday had formally issued notices regarding potential impacts to their LNG projects in Lousiana.
“However, aggregate Evening cycle delivery nominations to Sabine Pass LNG have dipped day/day by around 313 MMcf/d and are currently posted at 2.8 Bcf/d for Thursday (July 11),” Genscape analysts Dominic Eggerman and Allison Hurley said.
“Conversely, scheduled nominations to Cameron LNG have jumped to 624 MMcf/d for today’s gas day, up from 390 MMcf/d yesterday. Nominations headed toward Corpus Christi LNG -- located further south and east of the storm’s projected path -- remain flat at 1.2 Bcf/d for Thursday.”
Meanwhile, estimates have been pointing to a near-average build from Thursday’s weekly Energy Information Administration (EIA) storage report, scheduled for release at 10:30 a.m. ET. A Bloomberg survey showed a median prediction for a 76 Bcf injection for the period ended July 5, with estimates ranging from 62 Bcf to 84 Bcf. A Reuters survey called for a 73 Bcf build, with a range of 62 Bcf to 80 Bcf.
Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at 80 Bcf. NGI’s model predicted a 70 Bcf injection.
Last year, EIA recorded a 55 Bcf injection for the period, and the five-year average build is 71 Bcf.
August crude oil futures were trading 10 cents higher at $60.53/bbl shortly after 8:30 a.m. ET, while August RBOB gasoline was up fractionally to $2.0132/gal.