Natural gas futures were trading sharply lower early Wednesday as analysts warned of a potentially prolonged post-Hurricane Laura demand recovery. The October Nymex contract was off 8.8 cents to $2.439/MMBtu at around 8:50 a.m. ET.
It could take weeks for natural gas demand along the Gulf Coast to return to pre-Laura levels, according to estimates from Genscape Inc.
“Many facilities near the path of the storm shut down as a precaution, but most have started ramping back up,” Genscape analyst Dan Spangler said. “Notable examples include Motiva’s Port Arthur refinery, which is scheduled to consume roughly 50% of the natural gas it normally does. The facility spent only one day shut down when Laura made landfall last Thursday.
“Similarly Natgasoline’s methanol plant spent three days offline based on scheduled natural gas deliveries but has since returned to 70% of normal levels. Both facilities consume well over 100 MMcf/d and are located near Beaumont, TX.”
Things are taking much longer to ramp back up for facilities across the state line in Louisiana, Spangler said. Power outages impacting homes and the “massive industrial complexes” in the Calcasieu Parish could last weeks, according to the analyst.
To the south in Cameron Parish, the Sabine Pass and Cameron liquefied natural gas (LNG) export facilities had yet to resume operations as of early Wednesday, Spangler said.
“Cameron LNG hasn’t reported taking any feed gas since Aug. 26. Sabine has similarly been at 0 since Aug. 25,” the analyst said. “However, Creole Trail Pipeline is reporting a tiny 8 MMcf/d delivery to the facility as of the evening cycle of today’s gas day.”
Meanwhile, looking at the latest forecast guidance, Bespoke Weather Services early Wednesday highlighted a mix of changes to the weather models over the previous 24 hours. Changes included cooler trends from the American modeling and slightly warmer trends from the European, according to the forecaster.
“With the La Nina state still well-entrenched,” Bespoke said it favored the European model for its latest forecast Wednesday. “…It is often difficult to avoid a hotter overall month in years where the global base state has been trending toward the La Nina side of the spectrum. Now, the best anomalous heat may well be in the back half of the month, which of course has less impact than the first half given a rapid decline in normal temperatures.”
From a technical perspective, Tuesday’s sell-off was only the first step for the bears, according to ICAP Technical Analysis analyst Brian LaRose.
“The next step, build on their progress by chipping away at support,” LaRose said, pegging support targets at $2.429, $2.371, $2.308 and $2.256. “…Only if the bears can force natural gas beneath these obstacles will the case for a more significant top start to gain traction. Bears have work to do.”
October crude oil futures were up 18 cents to $42.94/bbl at around 8:50 a.m. ET, while October RBOB gasoline was trading about 1.4 cents higher at $1.2385/gal.
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