Analysts continued to keep a close eye on signs of post-Laura recovery in liquefied natural gas (LNG) export activity early Friday as natural gas futures probed a few cents higher. The October Nymex contract was up 2.8 cents to $2.515/MMBtu at around 8:50 a.m. ET.
Balance data early Friday showed no major changes day/day for LNG export demand, production or power burns, according to Bespoke Weather Services.
“Expectations are still for LNG to come back, but so far we have seen little recovery since Hurricane Laura,” the firm said. “The story remains the bearish fundamental picture at the front of the curve, with very high storage levels, and balances that look to be loosening, at least until LNG can finally ramp back up.”
The bearishness near the front of the curve is “contrasted with the bullish fundamental backdrop for winter and calendar 2021.”
There have been “increasing signs” that Cheniere Energy Inc.’s Sabine Pass terminal could be on track to restart soon, according to analysts at EBW Analytics Group.
“While Cheniere has not released any information regarding its restart plans, with the Labor Day holiday about to begin, the likelihood that Sabine Pass will be at least partially up and running when the market reopens next Tuesday seems reasonably high,” the EBW team said. Even if the restart of the Cameron LNG terminal continues to see delays, “this could bring total LNG feed gas flows to as much as 6-7 Bcf/d, reigniting the natural gas rally.”
Looking at the storage picture, the U.S. Energy Information Administration (EIA) on Thursday reported a 35 Bcf injection into storage for the week ending Aug. 28, a figure that was in line with median estimates. The latest injection was below the 77 Bcf injection reported a year earlier and also notably lower than the 66 Bcf five-year average. The build for the Aug. 28 week boosted inventories to 3,455 Bcf, well above the year-earlier level of 2,917 Bcf and above the five-year average of 3,048 Bcf.
“Power generation was the story” for this week’s EIA report, according to analysts at Tudor, Pickering, Holt & Co. (TPH), who estimated an average of around 41.5 Bcf/d of power burns for the week, a total high enough to set a new seasonal record by nearly 3 Bcf/d. “Power generation was spurred by degree days, which were a whopping 22% above norms, continuing a trend of strong weather across the entire injection season as cumulative degree days are up 10% versus the five-year.”
However, TPH said data for the current week points to a roughly 5 Bcf/d week/week drop in power burns. That combined with weaker liquefied natural gas demand from Laura-related outages has TPH estimating a roughly 6 Bcf/d week/week drop-off in total demand.
“As a result, we’re looking for a much larger build next week, currently modeling a 68 Bcf build, which would be in-line with seasonal norms,” the analysts said.
October crude oil futures were up 19 cents to $41.56/bbl at around 8:50 a.m. ET, while October RBOB gasoline was trading fractionally lower at $1.2024/gal.
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