Natural gas traders had a veritable maelstrom of factors to consider as they plotted potential price moves early Thursday, including a major storm crashing into the Gulf Coast, updated government inventory data and looming front-month expiration.
As of around 8:40 a.m. ET, the expiring September Nymex contract was trading 4.7 cents higher at $2.508/MMBtu. October was up 3.6 cents to $2.610.
Hurricane Laura made landfall near Cameron, LA, as a Category 4 storm in the early morning hours Thursday. Laura approached land with maximum sustained winds of 150 mph, according to the National Hurricane Center (NHC).
As of 8 a.m. ET, “damaging winds and flooding rainfall” were spreading inland over western and central Louisiana, and “life-threatening storm surge” was continuing “along much of the Louisiana coastline,” the NHC said.
“On the forecast track, Laura will move northward across western and northern Louisiana through this afternoon,” the forecaster said. “The center of Laura is forecast to move over Arkansas tonight, the mid-Mississippi Valley on Friday, and the Mid-Atlantic states on Saturday.”
Laura has essentially completely shut down production in the Gulf of Mexico, Genscape Inc. analyst Nicole McMurrer said in a note to clients early Thursday.
“This morning we are seeing additional production declines” in the Haynesville Shale, South Louisiana and South Texas, McMurrer said.
There have been operational flow orders or force majeures issued on the ANR, Cameron, Columbia Gulf, Kinder Morgan Louisiana and Natural Gas Pipeline Co. of America systems, according to the analyst.
Liquefied natural gas feed gas demand dropped further from Wednesday’s levels as both the Cameron and Sabine Pass export terminals were “completely offline” early Thursday.
“Still no inbound vessel traffic allowed at Port Arthur, Lake Charles or Houston Ship Channel,” McMurrer said. “Power demand will be negatively impacted as hundreds of thousands are without power.”
It’s going to take time to assess Laura’s impact, according to analysts at EBW Analytics Group.
“The loss of demand for natural gas is likely to be significantly greater than was anticipated just 24 hours ago, especially if Sabine Pass or Cameron are forced to stay offline for an extended period,” the EBW analysts said. “This could create significant downward pressure on the front end of the curve, especially at a time when demand for gas was already expected to decline.”
While the energy industry has been understandably preoccupied with Laura’s arrival, natural gas traders will also have to account for potential price impacts from the latest Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET.
Analysts have been calling for a build in the mid- to high 40s Bcf for Thursday’s report, which covers the week ending Aug. 21. That would compare with the 60 Bcf increase in storage EIA recorded for the similar week last year. The five-year average stands at 49 Bcf.
A Bloomberg survey as of Wednesday showed injection estimates ranging from 39 Bcf to 58 Bcf, with a median of 44 Bcf. A Wall Street Journal poll had the same range and arrived at an average 46 Bcf injection, while the median of a Reuters poll with the same range produced a 47 Bcf build. NGI projected a smaller 43 Bcf injection.
“It was slightly cooler than normal over the east-central and Mid-Atlantic regions, while hotter than normal elsewhere” during this week’s EIA report period, NatGasWeather said. “We expect a build of 47-48 Bcf…And if an EIA report and a major hurricane weren’t enough, we also have expiration of September 2020 futures at the close, where October 2020 trades around 10 cents higher.”
October crude oil futures were down 20 cents to $43.19/bbl at around 8:40 a.m. ET, while September RBOB gasoline was off about 4.0 cents to $1.3208/gal.
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