Following through on the previous session’s prodigious rally and then some, natural gas futures soared early Friday as traders contemplated tight balances and a potential major Gulf Coast hurricane. The expiring September Nymex contract was up 18.0 cents to $4.364/MMBtu at around 8:45 a.m. ET. October was up 17.2 cents to $4.383.
At 8 a.m. ET Ida was churning near the Cayman Islands as a tropical storm, carrying maximum sustained winds of 60 mph, according to the National Hurricane Center (NHC). The latest forecast track showed Ida approaching the northern Gulf Coast on Sunday.
NHC said it expects “additional steady to rapid strengthening” over the next few days, with Ida projected to be “at or near major hurricane strength when it approaches the northern Gulf Coast.”
Bespoke Weather Services noted that the forecast track as of early Friday had Ida making landfall over central Louisiana, suggesting liquefied natural gas (LNG) export terminals could avoid the worst impacts.
The track showed Ida “targeting central Louisiana Sunday night, impacting Gulf production zones, but likely to hit just east of LNG facilities, so little impact is expected there,” Bespoke said. “This likely will not be the last threat to the U.S. this tropical season.”
As for prices, Bespoke had one phrase to describe recent action.
“Up, up and away!” the firm said. “That’s the theme in the natural gas market today, as we are extending yesterday’s massive rally so far this morning…We had discussed the odds favoring a rally into contract expiration, but the magnitude of this move has been quite stunning.”
Bespoke characterized the move higher as primarily a reaction to Thursday’s Energy Information Administration (EIA) storage report, a smaller-than-expected 29 Bcf injection that also came in on the bullish side of historical norms.
The build left total Lower 48 working gas in storage at 2,851 Bcf as of Aug. 20, 16.5% below year-ago levels and 6.2% below the prior five-year average, according to EIA.
“While the picture is indeed quite supportive, we’d be cautious of ‘too much, too fast’ here, as we feel some of yesterday’s EIA print may have been a small make-up for the big bearish number” reported a week earlier, “and we are not expecting next week’s number to be nearly as tight,” Bespoke said. “That could promote a pullback/consolidation next week.”
Analysts at Tudor, Pickering, Holt & Co. (TPH) said higher exports, via both LNG and increased flows to Mexico, offset lower power generation demand to help drive the week/week change in inventories.
“The South Central region was largely to thank for the below average build, drawing 14 Bcf versus norms of a 5 Bcf draw,” the TPH analysts said.
For next week’s EIA report, the firm said its preliminary modeling points to a 27 Bcf injection that would be bullish versus the five-year average. Week-to-date estimates show “a nearly 2 Bcf/d pick-up in power generation demand and continued strength in LNG exports,” the TPH analysts said.
Crude oil futures were up $1.63 to $69.05/bbl a little after 8:45 a.m. ET.
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