After rallying late last week on the prospect of recovering liquefied natural gas (LNG) demand, October gas futures lost ground in early trading Tuesday even as estimates showed the anticipated recovery in export activity coming to fruition. The October Nymex contract was down 3.9 cents to $2.549/MMBtu at around 8:45 a.m. ET.
Total U.S. LNG feed gas demand has returned to levels observed prior to the shut-ins forced by former Hurricane Laura’s landfall over the Gulf Coast last month, according to estimates from Genscape Inc.
With Cheniere Energy Inc.’s Sabine Pass terminal resuming liquefaction operations, U.S. LNG feed gas demand from interstate pipelines totaled 4.88 Bcf/d as of the evening cycle for Tuesday’s gas day, roughly 1.42 Bcf/d higher than Friday’s total, the firm said.
“Mid-morning Friday (Sept. 4), Genscape infrared monitors initially detected an ethylene engine online at Sabine Pass Train 2,” analysts Preston Fussee-Durham and Allison Hurley said in a note to clients. “Sabine Pass trains continued resuming engines in the first half of the day” on Saturday “and have ramped up over the long weekend. Currently, Sabine Pass LNG is running all five trains.”
Heading into Tuesday’s trading, analysts at EBW Analytics Group said the main questions for the market revolved around how quickly Sabine will fully return to normal activity and how much longer the Cameron LNG terminal will remain shut down in the wake of last month’s storm.
“As a result of the extended shut-down of Sabine Pass, Cheniere has built up a large backlog of cargoes to be loaded later this month,” the EBW analysts said. “While the timing of the ramp-up is still uncertain, during the next five to seven days, feed gas flows could increase by as much as 3-4 Bcf/d and stay high through the end of September.
“This could send the October natural gas contract to $2.71 or higher.”
A counterpoint to the rising LNG demand, estimates early Tuesday showed production rising to slightly above pre-Laura levels, according to Bespoke Weather Services.
“We feel the LNG ramp-up was factored into the rally back on Friday, which likely explains why prices are a little lower so far this morning,” Bespoke said. “The theme has not changed in our view,” with the outlook still “dicey at the front of the curve as we head toward the end of injection season in terms of possible containment issues.” However, “the backdrop still looks bullish into winter on a fundamental basis, with weather, as always, the big wildcard.”
In terms of the latest guidance early Tuesday, the firm said it added to its 15-day demand projections compared to Friday’s forecast. The higher demand expectations stem from hotter changes to the temperature outlook this week “as the strong cold front coming into the central U.S. has shifted farther west, having less impact than previously expected in the Midwest and down into parts of the South, including Texas.”
Expected national gas-weighted degree day totals over the next 15 days remain close to normal levels, Bespoke said.
October crude oil futures were off $2.32 to $37.45/bbl at around 8:45 a.m. ET, while October RBOB gasoline was down about 5.9 cents to $1.1184/gal.
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