After surging higher last week, natural gas futures pulled back in early trading Tuesday as analysts continued to mull ongoing impacts to both demand and supply from Hurricane Ida. The October Nymex contract was down 6.7 cents to $4.645/MMBtu as of 8:45 a.m. ET.
Looking at the latest supply and demand data points early Tuesday, Bespoke Weather Services noted some production returning to the market, bringing Lower 48 supply back to 91 Bcf/d.
“The bearish component comes via what looks like more of a loss in industrial demand thanks to the impact of Hurricane Ida, which is boosting estimates for this week’s” Energy Information Administration (EIA) storage report, Bespoke said. “Intuitively, one would think this is a short-term issue, as other components of the supply/demand balance remain strong, but after such a massive move higher over the last couple of weeks it does not take much bearishness in the data to pull the market back.”
NGI is modeling a below-average 38 Bcf injection into U.S. gas stocks for Thursday’s EIA report, which covers the week ended Sept. 3. That would compare with a five-year average 65 Bcf injection. The year-earlier build for the period is also 65 Bcf.
Meanwhile, forecasts warmed over the weekend, according to EBW Analytics Group. The firm modeled cooling degree day (CDD) increases for the second and third upcoming storage weeks (Friday through Sept. 23) as a result.
“Already this morning, however, overnight warming in the Week 3 forecast was fully offset by declines in early autumn space heating demand,” EBW analysts wrote in a note to clients. “Any further warming for Week 3 and beyond is likely to similarly trend bearish.”
Bespoke similarly observed warmer trends over the extended Labor Day weekend, including higher CDD totals across the eastern half of the nation from late this week through next week.
After mid-September, temperatures start to transition into heating degree day (HDD) territory, “and those will run below normal levels,” Bespoke said. “HDD in September do not add much to true demand, however, so we would still rate the forecast changes as a little more bullish versus Friday.”
In the near term, the key question for the market will be how quickly Gulf of Mexico (GOM) production recovers following the shut-ins forced by Hurricane Ida, according to EBW.
The Bureau of Safety and Environmental Enforcement reported 1.8 Bcf/d of GOM natural gas still shut in as of Monday, or around 81% of total output.
“Prolonged outages are likely to help cushion price declines,” the EBW analysts said. “If production shows signs of returning more quickly, however, downward price pressure on Nymex gas is likely to intensify.”
October crude oil futures were down $1.02 to $68.27/bbl at around 8:45 a.m. ET.
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