With a hurricane tracking toward Florida and the Southeast later this week, potentially impacting natural gas demand in the process, futures extended their losses in early trading Monday.
The October Nymex contract was off 15.3 cents to $6.675/MMBtu at around 8:45 a.m. ET. November was down 13.6 cents to $6.856.
Hurricane Ian, churning about 275 miles southeast of the western tip of Cuba early Monday, was expected to undergo “additional rapid strengthening,” according to the National Hurricane Center.
The forecast track called for Ian to “emerge over the southeastern Gulf of Mexico on Tuesday, pass west of the Florida Keys late Tuesday, and approach the west coast of Florida on Wednesday,” the forecaster said.
Ian, combined with the looming expiration of the October contract, could make for a volatile week for natural gas prices, according to NatGasWeather.
“The track of Ian shifted slightly westward over the weekend and a little closer to oil and gas platforms in the Gulf of Mexico, but still leaving the densest oil and gas infrastructure along the Gulf Coast mostly unaffected,” NatGasWeather said. “We are expecting production in the Gulf of Mexico to drop 1-2 Bcf/d as they evacuate platforms, regardless of if it hits any or not.”
Ian’s projected path also threatens demand destruction in the form of power outages and cooler temperatures for Florida and the Southeast later this week, the firm added.
Meanwhile, natural gas prices took out “key technical and psychological support near $7” to close out last week’s trading, EBW Analytics Group senior analyst Eli Rubin observed. Friday’s price action could create an opening for “significant further declines early this week,” the analyst added.
“Fundamentals are similarly trending in a bearish direction, with daily production again flirting with all-time records over the weekend” and forecast trends lowering heating demand expectations around the second week of October, Rubin said. “Further, Hurricane Ian appears likely to avoid key Gulf production regions and yield demand destruction in Florida and the Southeast.”
Still, even as prices appear likely to experience continued downward pressure, the October contract expiration “could inject tremendous further volatility,” Rubin added.
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