Natural gas futures continued to come under downward pressure near the front of the curve in early trading Friday, with a larger-than-expected inventory build and tropical cyclone-related demand destruction weighing on prices.
The October Nymex contract was down 4.9 cents to $1.993/MMBtu at around 8:45 a.m. ET. Conversely, January was up 4.3 cents to $3.272.
The October contract plummeted 22.5 cents in Thursday’s session in the wake of the Energy Information Administration’s (EIA) latest weekly storage report, an 89 Bcf build for the period ending Sept. 11 that surprised to the high side. The plump build added to Lower 48 gas stocks that were already sitting well above historical norms.
Inventories ended the week of Sept. 11 at 3,614 Bcf, 535 Bcf higher than last year and 421 Bcf above the five-year average, according to EIA.
It was “an ugly print” that “threw gasoline on the fire” for the natural gas market, sending prices plunging on the day, analysts at Tudor, Pickering, Holt & Co. (TPH) said.
“The build was well above even the most bearish estimates and reflects a significant 2 Bcf/d deviation from our supply/demand balances,” the TPH analysts said. “Further concern comes from where the builds occurred,” with the South Central injection easily outpacing historical norms amid recent disruptions at the Sabine Pass and Cameron liquefied natural gas (LNG) facilities.
TPH estimated that South Central storage is now at 89% of total capacity.
This “is worthy of concern,” but with Sabine Pass feed gas flows up an estimated 2 Bcf/d week/week and Cameron expected to return to service in the next two to three weeks, “we think storage will be able to sneak by,” the TPH team said.
LNG feed gas flows have rebounded from the lows recorded this summer amid economic weakness and impacts from Hurricane Laura. However, the Cameron facility remains offline, and Hurricane Sally, while striking east of major producing areas in the Gulf Coast region, continues to impact demand, Genscape Inc. analyst Dan Spangler said.
This comes as forecasters at the National Hurricane Center (NHC) were busy monitoring the development of Tropical Depression Twenty-Two in the western Gulf of Mexico early Friday. The system, a slow-moving depression about 245 miles east-northeast of Tampico, Mexico, was expected to become a tropical storm later Friday. The storm was moving north-northeast at close to 6 mph and expected to continue following this general direction through early Saturday.
“If Tropical Depression Twenty-Two strengthens to a tropical storm as projected, it would take the final name from the 2020 list, highlighting the exceptionally active hurricane season,” Genscape’s Spangler said. “…This storm could prompt offshore evacuations and production drops as seen with Laura and Sally, but it could also cause major disruptions to LNG, industrial and power demand, also seen with Laura and Sally.”
October crude oil futures were off 26 cents to $40.71/bbl at around 8:45 a.m. ET, while October RBOB gasoline was down fractionally to $1.2197/gal.
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