Tight domestic balances, strength in global prices and a tropical cyclone churning along the coast of Texas gave traders plenty to ponder early Tuesday as natural gas futures continued their ascent. After rallying 29.3 cents in the previous session, the October Nymex contract was up another 10.3 cents to $5.334/MMBtu at around 8:50 a.m. ET.
As of 8 a.m. ET Tuesday Tropical Storm Nicholas was about 15 miles south-southwest of Houston and moving “slowly” toward the city at about 8 mph, according to the National Hurricane Center (NHC).
“The storm should move more slowly to the northeast later today, and then turn eastward by Wednesday over Louisiana,” forecasters said. “Little motion is anticipated on Thursday.”
The NHC said it expected Nicholas to weaken as it moves farther inland, eventually becoming a tropical depression by Wednesday morning.
“Nicholas is expected to produce additional rainfall of five to 10 inches from the upper Texas coastal area into central and southern Louisiana, far southern Mississippi and far southern Alabama, with isolated storm totals of 20 inches across central to southern Louisiana,” the NHC said, warning of potential “life-threatening flash flooding.”
The projected path as of early Tuesday showed more of the counties recently hit by Hurricane Ida seeing heavy rains once more as a result of Nicholas, Wood Mackenzie analyst Kara Ozgen wrote in a note to clients.
Based on recent pipeline operational notices, risks to production and transportation from Nicholas appeared low, Ozgen said.
As for liquefied natural gas (LNG) export operations, “Nicholas can disrupt the intended path of LNG vessels, but any disruptions may be short-lived,” the analyst said. “The other risk to LNG operations is power outages. Generally, LNG facilities have some back-up on-site generation, but they mainly receive power from the grid. If power is out for an extended amount of time, this could threaten liquefaction processes.”
Nicholas appeared most likely to impact power demand, with the storm “expected to cause power outages along the Coastal Bend and in Louisiana/Mississippi again,” according to Ozgen.
Meanwhile, NatGasWeather pointed to strength in global natural gas prices to help explain the recent bullishness in Henry Hub futures.
Also contributing to bullish momentum has been “a tight U.S. supply/demand balance, aided by strong LNG feed gas and production still off in the Gulf of Mexico” in the wake of Ida, the firm said in a note to clients early Tuesday.
“To the bearish side,” major weather models “shed nearly 10 Bcf in demand over the past 24 hours,” with the data showing “near-seasonal demand much of the next seven days, then very light demand for the eight- to 15-day period for larger builds” into storage, NatGasWeather said.
October crude oil futures were up 51 cents to $70.96/bbl at around 8:50 a.m. ET.
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