With supportive trends in the latest guidance, and with Hurricane Dorian expected to have limited impacts on natural gas demand, futures were trading somewhat higher early Tuesday. The October Nymex contract was trading 1.3 cents higher at $2.298/MMBtu shortly after 8:30 a.m. ET.
Guidance shifted warmer over the weekend, showing “the strongest heat ridge” moving in the weeks ahead from the West over to the eastern half of the country, according to Bespoke Weather Services.
“While it’s not the time of year when weather is the primary driver, it is still rather supportive thanks to above normal heat blanketing the southern half of the nation for the foreseeable future,” Bespoke said. “We also see less demand destruction from Hurricane Dorian, as it stays far enough off the Florida coast to avoid reducing demand as much as previously feared.”
The National Hurricane Center’s (NHC) 8 a.m. ET advisory located Dorian, which crashed into the Bahamas over the holiday weekend, about 110 miles east-northeast of West Palm Beach, FL. Maximum sustained winds were measured at 120 mph.
“Dorian is beginning to move northwestward at 1 mph, and a slightly faster motion toward the northwest or north-northwest is expected later today and tonight,” NHC said. “A turn toward the north is forecast by Wednesday evening, followed by a turn to the north-northeast Thursday morning.
“On this track, the core of extremely dangerous Hurricane Dorian will gradually move north of Grand Bahama Island through this evening. The hurricane will then move dangerously close to the Florida east coast late today through Wednesday evening, very near the Georgia and South Carolina coasts Wednesday night and Thursday, and near or over the North Carolina coast late Thursday.”
Dorian has the potential to deliver a short-term “demand shock” for natural gas, but any demand impact would be “relatively insignificant” from a macro perspective, analysts with Tudor, Pickering, Holt & Co. (TPH) said.
“Average September gas demand for power generation in Florida is about 4 Bcf/d, with an incremental 0.3 Bcf/d from the industrial sector, putting short-term demand impacts within the range of normal weather-related fluctuations and unlikely to have any significant implications to the broader macro gas market,” the TPH team said. “The latest data shows power generation demand in the Southeast region, which includes Florida, is down about 1 Bcf/d over the past three days, which may be related to hurricane preparations.”
As of early Tuesday, there were no visible impacts to gas flows from Dorian, according to Genscape Inc.
“As of this morning, none of Florida’s major utilities are reporting any storm-related power outages,” the firm said. “All of Florida’s nuclear power units -- St. Lucie 1 & 2, and Turkey Point 3 & 4 -- are fully operational. Sample power burn for the Southeast/Mid-Atlantic region the past 14 days has averaged 11.83 Bcf/d.”
October crude oil futures were trading $1.27 lower at $53.83/bbl shortly after 8:30 a.m. ET, while October RBOB gasoline was off about 5.5 cents at $1.4750/gal.