Natural gas futures hovered close to even early Tuesday as traders monitored the strengthening Hurricane Laura, which was threatening both supply and demand as it churned toward the Gulf Coast. The September Nymex contract was up 1.9 cents to $2.532/MMBtu at around 8:45 a.m. ET.
At 8:15 a.m. ET Tuesday, the National Hurricane Center reported that Laura had strengthened into a hurricane. The storm was about 145 miles northwest of the western tip of Cuba and carried maximum sustained winds of 75 mph.
“The center of Laura will move away from Cuba and over the southeastern Gulf of Mexico this morning,” the forecaster said. “Laura is then forecast to move over the central and northwestern Gulf of Mexico tonight and Wednesday, approach the Upper Texas and Southwest Louisiana coasts on Wednesday night and move inland near those areas on Thursday.”
Energy operators in the Gulf Coast region have moved into action to brace for Laura’s arrival.
On the supply side, the Bureau of Safety and Environmental Enforcement reported Monday that offshore operators had shut in about 1.5 Bcf/d of natural gas production.
On the demand side, Genscape Inc. estimates as of early Tuesday showed a drop of 850 MMcf/d in liquefied natural gas (LNG) feed gas demand since Sunday. Declines have been focused on the Sabine Pass and Cameron LNG terminals, a result of “delayed loadings and limited available storage capacity,” according to analyst Preston Fussee-Durham.
Along with the LNG feed gas impacts, “demand destruction from clouds, rain, cooling and power outages” could further offset any lost production from Laura, forecaster NatGasWeather said.
Between Laura’s arrival and the expiration of the September contract, analysts at EBW Analytics Group said they’re expecting plenty of volatility in natural gas prices this week.
Laura figures to dominate price action Tuesday as the market braces for landfall on Wednesday, the EBW team said.
“If intraday forecasts call for it to strengthen into a Category 3 hurricane, the September contract could challenge resistance at $2.62. If Laura weakens, though, support at $2.39-2.44 is likely to be tested again,” they said. “Volatility could be greater on Wednesday, when options expire, and on Thursday, when final settlement will occur on the same day” the Energy Information Administration reports weekly inventory data.
“Large price swings are possible, with considerable uncertainty regarding where prices will land.”
As for overnight changes in the 15-day forecast, NatGasWeather said the Global Forecast System lost several cooling degree days by showing cooler trends in the northern part of the country for next week.
“High pressure attempts to build into the East early next week and again around Sept. 5 for minor bumps in national demand,” the forecaster said. “However, we expect the weather data will be inconsistent until it locks down the exact track of Hurricane Laura.”
October crude oil futures were up 34 cents to $42.96/bbl at around 8:45 a.m. ET, while September RBOB gasoline was up about 4.4 cents to $1.4113/gal.
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