• October natural gas dips in light pre-holiday session
  • Hurricane Dorian could spark near-term downside risk for futures, cash markets
  • Cash mixed as heat returns to West Coast

Natural gas traders got a jump start on Friday ahead of the long Labor Day holiday, with low volumes of gas traded at prices not far removed from the previous day’s settles. With bears failing to make a big splash, the October Nymex gas futures contract slipped only 1.1 cents to $2.285, and November fell 1.8 cents to $2.324.

Spot gas prices were also mixed as the threat of Hurricane Dorian, the fourth named storm and second hurricane of the Atlantic hurricane season, sent Southeast markets a few cents lower on Friday, which traded for delivery Sunday-Tuesday. However, returning heat out West reignited prices there, boosting the NGI Spot Gas National Avg. by a half-cent to $1.965.

Dorian, expected to reach Category 4 status before it nears, as forecast, the Florida peninsula late Monday, was seen causing widespread power outages amid heavy rains and strong winds. Georgia Gov. Brian Kemp on Friday declared a state of emergency in the southern portions of the state, while Florida has operated under the emergency order since Thursday.

The projected loss of power demand resulting from the storm poses downside risk for Nymex futures, according to analysts. The most recent hurricane to cause notable demand destruction in the region was last October’s Hurricane Michael.

During Michael’s most intense period, Southeast region power burns fell nearly 3.2 Bcf/d from their pre-storm 14-day average, according to Genscape Inc. Burns remained below average for six days during Michael and its aftermath, although that storm’s trajectory covered more land than Dorian’s currently projected path.

Elsewhere across the country, hot conditions were forecast to continue across the West and Texas throughout the week, with highs remaining in the 90s and low 100s, according to NatGasWeather. Conditions were also expected to briefly warm across the Midwest, Ohio Valley and Northeast as upper high pressure strengthens.

“It would be more impressive on a national scale” early in the week if not for Dorian bringing showers and cooling to the Southeast, NatGasWeather said. Where the data remained bearish is Sept. 6-13 as heat shifts back over the South and West, leaving the rest of the country comfortable and making for overall light national demand.

Noting that the market is approaching a time of year that often favors bulls, Bespoke Weather Services said Dorian may throw the market off course. “It’s tricky, as we still feel like there is upside risk as we head toward the start of fall, but feel like risk is skewed toward a pullback first.”

With traders expected to return to their desks well rested from the holiday weekend, EBW Analytics Group said it would be keeping a close eye on October/January spread, with the January premium to October falling to only 30.3 cents on Friday, the lowest since April.

While the October contract rallied during the last week of August, market conviction behind the move up appeared to be lacking for the January contract.

“The huge short positioning could be a factor behind the tightening spread,” EBW said.

Looking ahead, the market will become increasingly focused on the full in-service of Kinder Morgan Inc.’s Gulf Coast Express by late September, as well as liquefied natural gas (LNG) exports and exports to Mexico.

Flow data suggests LNG feed gas hit a new record of 6.9 Bcf/d on Thursday, and flows to liquefaction facilities are expected to average between 6.5 and 7.0 Bcf/d for the balance of the year, according to Tudor, Pickering, Holt & Associates Inc. (TPH).

Freeport LNG had been expected to export its first cargo by the end of August, and an unladen tanker arrived at the Texas facility on Friday in preparation for first cargo loading, according to the company.

“LNJ Jurojin arrived at our dock this morning,” Freeport spokeswoman Heather Brown told NGI on Friday. Terminal operators did not expect Dorian to impact the first cargo load process.

Meanwhile, for TPH, “the greater unknown is Mexico,” where a pipeline dispute has been resolved and which should allow the Sur de Texas-Tuxpan 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 an uptick of around 0.7 Bcf/d towards year-end and into 1Q2020 as the 0.9 Bcf/d Villa de Reyes is phased in.”

Cash Mixed

Spot gas, which traded Friday for delivery Sunday through Tuesday, was mixed as weather patterns varied across the United States.

Heat was set to return to California after a slightly milder Labor Day holiday, leading to steep double-digit gains across the state. SoCal Citygate jumped a region-leading 42 cents to average $3.15.

The Rockies also put up meaningful increases. The exception was at points along El Paso Natural Gas, which continued to restrict flows along portions of its system.

Permian Basin pricing was kept in check Friday as prices shifted less than a nickel higher across the region. Similarly small gains were seen across the rest of Texas, while cash moved lower in most of the Midcontinent.

Prices softened across the Midwest, where Chicago Citygate fell 4.5 cents to $1.99.

Interestingly, only modest losses of a few pennies were seen in much of the Southeast, although Florida Gas Zone 3 dropped a more significant 8 cents to $2.26, a small discount to benchmark Henry Hub. Dominion Energy Cove Point tumbled 13 cents to $1.95 despite stable intake at the LNG export terminal.

Appalachia prices were down mostly between 10 and 15 cents, while Transco Zone 6 NY fell 6 cents to $1.575.