Natural gas futures were trading close to even early Tuesday as overnight weather trends were mixed and a tropical cyclone approaching the Gulf of Mexico (GOM) prompted further production declines. The November Nymex contract was trading 0.4 cents lower at $3.020/MMBtu at around 8:45 a.m. ET. December was down 1.8 cents to $3.235.
Tropical Storm Zeta was about 45 miles east of Progreso, Mexico, and 540 miles south of the mouth of the Mississippi River as of 8 a.m. ET Tuesday, the National Hurricane Center (NHC) said. The storm was traveling northwest at 14 mph and carrying maximum sustained winds of 70 mph.
“Zeta should turn toward the north tonight, and a faster northward to north-northeastward motion is expected on Wednesday,” the NHC said. “On the forecast track, the center of Zeta will move over the southern Gulf of Mexico later this morning, and over the central Gulf of Mexico tonight. Zeta is forecast to approach the northern Gulf Coast on Wednesday” and make landfall late Wednesday or Wednesday night.
The arrival of the latest tropical cyclone to sweep through the GOM this season has prompted another round of offshore production shut-ins. Genscape Inc. estimates early Tuesday showed GOM dry gas production sliding to 447 MMcf/d, down from more than 1.5 Bcf/d as of this past Saturday.
Production declines since Saturday have occurred on the Destin Pipeline, Nautilus, Transcontinental Gas Pipe Line, and Discovery Gas Transmission, Genscape analyst Preston Fussee-Durham wrote in a note to clients Tuesday.
“Currently, Destin and Nautilus have issued notices” concerning Zeta “and continue to evacuate nonessential personnel from their platforms,” Fussee-Durham said.
Meanwhile, the overnight forecast data was mixed, including colder trends for this weekend into early next week countered by milder trends for the Nov. 4-10 period, according to NatGasWeather.
The first seven days of the 15-day pattern now appear bullish, while days eight through 15 remain “solidly bearish” as warmer than normal temperatures are expected to spread over most of the country, the forecaster said.
“Volatile trade is expected the next few days as November 2020 contracts expire” and given recent market sensitivity to daily shifts in liquefied natural gas (LNG) demand, production and weather, NatGasWeather said. “LNG is down slightly day/day, but production is likely to be lower due to Zeta tracking through the Gulf. Weather trends have been mixed between colder for the front week but warmer for Week 2. Which of these elements will be most important for today’s trade?”
Looking at the technicals for the December contract, which takes over as the front month this week, prices could be pausing or peaking, according to ICAP Technical Analysis analyst Brian LaRose.
“While the path of least resistance still appears to be up for the November contract, the same can not be said for the December contract, which has struggled to reach fresh highs since late September,” LaRose said. Bulls will “need to quickly lift December over $3.362-3.370-3.404 to have a shot at $3.593-3.614. We see the risk for a sudden dump to $3.090-3.085, even $2.917-2.914 otherwise.”
December crude oil futures were up 17 cents to $38.73/bbl at around 8:45 a.m. ET, while November RBOB gasoline was up fractionally to $1.1183/gal.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |