With Hurricane Dorian looking “extremely dangerous,” natural gas futures were trading slightly lower early Friday as the latest path for the storm raised the prospect of demand destruction. The October Nymex futures contract was down 2.0 cents to $2.276/MMBtu shortly after 8:40 a.m. ET.
The National Hurricane Center (NHC) early Friday advised residents of central and southern Florida to closely monitor the progress of Dorian, which was churning about 255 miles east-northeast of the southeastern Bahamas as of 8 a.m. ET.
“Dorian is moving toward the northwest near 12 mph, and this motion is expected to continue through today,” NHC said. “A slower west-northwestward to westward motion is forecast to begin tonight and continue through the weekend.
“...Strengthening is forecast during the next few days, and Dorian is expected to become a major hurricane later today. Dorian is likely to remain an extremely dangerous hurricane while it moves near the northwestern Bahamas and approaches the Florida peninsula through the weekend.”
Genscape Inc. in a note to clients early Friday highlighted increased risk for “significant demand destruction” from Dorian by the time it reaches Florida, expected by early next week.
“The most recent hurricane to cause notable demand destruction in the region was last October’s Hurricane Michael,” Genscape senior natural gas analyst Rick Margolin said. “During that storm’s most intense period Southeast-region power burns fell nearly 3.2 Bcf/d from their pre-storm 14-day average. Burns remained below average for six days during Michael and its aftermath.”
Margolin said it’s important to note that Michael’s path covered more land than the recently projected path for Dorian.
Looking at the overnight guidance, Bespoke Weather Services said it moved its forecast somewhat warmer for the 11-15 day period, in line with upper level pattern changes observed in the European model.
The upcoming pattern “should shift the focus of above normal temperatures from the West over into the central and eastern U.S. as we move into the middle third of September,” the forecaster said. “As we’ve pointed out, however, it will take strong anomalies in these regions to move the needle much, but we cannot rule out some notable spikes relative to the time of year.
“Dorian still looks like a Florida issue, and a serious one. In terms of impact on natural gas, the story will be demand destruction early next week.”
Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 60 Bcf injection into Lower 48 gas stocks for the week ending Aug. 23, a figure on the higher side of expectations. The reported build came in below last year’s 66 Bcf injection but a few Bcf above the five-year average of 57 Bcf, according to EIA. Total working gas in storage as of Aug. 23 stood at 2,857 Bcf, 363 Bcf higher than last year and 100 Bcf below the five-year average.
While coming in below the year-ago injection for the first time since May, the build still implied a 2 Bcf/d oversupplied market after adjusting for degree days, according to analysts with Tudor, Pickering, Holt & Co. (TPH).
“As we await full capacity on Gulf Coast Express, expected in the third week of September, the focus is on exports,” for both liquefied natural gas (LNG) and via pipeline to Mexico, the TPH team said. “Flow data suggests LNG feed gas hit a new record of 6.9 Bcf/d yesterday, and we expect flows to liquefaction facilities to average between 6.5 and 7.0 Bcf/d for the balance of the year.
“The greater unknown is Mexico, where TC Energy Corp./Sempra Energy have resolved their dispute, which should allow Sur de Texas to begin flowing again in the near term. We see the line flowing about 0.5 Bcf/d initially as it displaces LNG imports, followed by an uptick of around 0.7 Bcf/d toward year-end into 1Q2019 as the 0.9 Bcf/d Villa de Reyes is phased in.”
Meanwhile, October crude oil futures were down 64 cents to $56.07/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was trading about 2.2 cents lower at $1.6631/gal.