Natural gas futures were trading higher early Wednesday ahead of a potentially volatile session with the front month expiring, although the latest forecasts appeared neutral for demand. The September Nymex contract was trading 3.1 cents higher at $2.233/MMBtu shortly after 8:40 a.m. ET.
Heading into Wednesday’s trading, the latest forecast outlook remained “singularly” neutral, placing demand expectations close to normal levels over the next 15 days, according to Bespoke Weather Services.
“We are a touch hotter than we were yesterday, but it is not a change deemed as notable,” Bespoke said. “We are seeing a little more above normal coverage in parts of the East in the six- to 15-day, though the best heat remains in the West. While we still feel mid to late September can see above normal heat, normal temperatures are declining rapidly, so barring extremes, it will be tougher for heat to have a material impact.”
Price action could be “erratic” with the September contract expiring Wednesday, Bespoke said.
“Longer term, we like upside price risks, though would not be surprised to chop around more in the near term,” the firm said.
Volatility in the futures market this week could die down after the September contract rolls off the board, according to analysts with EBW Analytics Group. Some of the recent volatility, including a 7.8-cent rally for the front month to start the week, may be traced back to events like a surge in liquefied natural gas (LNG) feed gas demand or news out of Mexico pointing to an imminent ramp up in flows on the Sur de Texas-Tuxpan pipeline, according to the firm.
“Options expiration and contract closeout also almost always create volatility,” the EBW analysts said. “Another major factor has been the impact of computer-driven trading. During the past year, in the days leading up to a major holiday -- when volumes are often light -- computer-driven trading has often shifted volatility into overdrive, with algorithms pushing prices up and down sharply.
“Most of this is noise. We expect trading to settle down after today’s final settlement, with prices most likely drifting lower heading into the holiday weekend.”
Meanwhile, the latest developments on Tropical Storm Dorian point to a “waning” risk for U.S. natural gas markets, according to Genscape Inc. analysts. The National Hurricane Center’s 8 a.m. ET advisory had Dorian located about 60 miles southeast of St. Croix in the Caribbean, traveling northwest.
“Tropical Storm Dorian continues to pose a hurricane threat, but its potential impact to U.S. gas markets is waning as its projected path is progressively migrating away from U.S. producing areas and demand centers,” Genscape senior natural gas analyst Rick Margolin said. “...The extent of its projected path has shifted eastward versus yesterday, possibly reaching the Florida Atlantic coast instead of taking direct aim at the tip of the state.”
October crude oil futures were up 88 cents to $55.81/bbl just after 8:40 a.m. ET, while September RBOB gasoline was up about 1.1 cents to $1.6604/gal.