Natural gas futures were up sharply in early trading Monday as forecasters were tracking a veritable scatterplot of named tropical storms in the Atlantic, including one that had forced production shut-ins in the Gulf of Mexico (GOM).
Meanwhile, estimates of daily liquefied natural gas (LNG) feed gas volumes rose over the weekend, outperforming analyst expectations and strengthening the near-term demand outlook.
The October Nymex contract was up 10.2 cents to $2.371/MMBtu at around 8:40 a.m. ET.
As of 8 a.m. ET the National Hurricane Center (NHC) was monitoring five named storms in the Atlantic. Among these, Tropical Storm Sally had drawn the closest to the Lower 48, churning about 115 miles east-southeast of the mouth of the Mississippi River.
The storm could produce “life-threatening storm surge, hurricane-force winds and flash flooding” over parts of the northern Gulf Coast late Monday, according to forecasters.
“Sally is moving toward the west-northwest near 8 mph,” the NHC said. “This general motion is expected today, followed by a decrease in forward speed and a turn to the northwest tonight and a northward turn sometime on Tuesday.”
The center of Sally was forecast to move over the north-central GOM Monday and approach southeastern Louisiana by the afternoon.
With Sally approaching, GOM production has dropped by 795 MMcf/d to around 882 MMcf/d, according to an estimate issued early Monday by Genscape Inc.
“As of evening cycle for today’s gas day, declines in GOM receipts relative to last Thursday (Sept. 10) are concentrated on Destin (down 301 MMcf/d), Transco (down 151 MMcf/d) and Discovery GT (down 120 MMcf/d),” the firm said.
Meanwhile, on the demand side, the Sabine Pass LNG terminal has ramped up activity since suspending operations during former Hurricane Laura. However, the Cameron LNG terminal remained offline as of early Monday, according to Genscape.
“Unlike Cameron, Sabine Pass has onsite power generation, and the facility wasn’t hit as hard by the storm,” Genscape analyst Dan Spangler said. “The facility is reporting the largest feed gas consumption levels since April, which has more than made up for the drop at Cameron.”
Genscape estimated total feed gas deliveries to U.S. export terminals of 6.64 Bcf/d for Monday’s gas day, up about 4.5 Bcf/d from lows recorded during Laura’s arrival.
Analysts at Tudor, Pickering, Holt & Co. (TPH) similarly estimated feed gas demand at 7.6 Bcf/d over the weekend, an increase “driven almost exclusively by Sabine Pass,” enough to push total U.S. export capacity utilization above 70%.
“The rapid increase in utilization is tracking ahead of our expectations, helping to further firm up the U.S. gas macro and relieving any residual risk of a storage crunch,” the TPH analysts said. “…With production remaining soft at around 88 Bcf/d, we think the strong LNG demand should quell any lingering storage concerns and, as such, we wouldn’t be surprised to see a near-term boost to the front end of the curve to narrow” the October/January spread.
October crude oil futures were off 32 cents to $37.01/bbl at around 8:40 a.m. ET, while October RBOB gasoline was up fractionally to $1.1037/gal.
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