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Natural Gas Fundamental Forecast – September 9, 2016

By:
Barry Norman
Updated: Sep 8, 2016, 12:01 UTC

Natural Gas added 32 points to 2.708 as traders continue to look for a bottom between seasons but they are hedging that the weekly inventory report due

Natural Gas Fundamental Forecast – September 9, 2016

Natural Gas added 32 points to 2.708 as traders continue to look for a bottom between seasons but they are hedging that the weekly inventory report due later today will show a smaller supply. The EIA printed an interesting article that could shift pricing in the natural gas markets. The mix of energy sources used for power generation in California this summer changed from last summer, as renewable and imported electricity offset lower natural gas use. During summer 2016 (June, July, and August), thermal generation almost all from natural gas in the area serviced by the California Independent System Operator was down 20% from the previous summer, while generation from hydroelectricity, other renewable, and electricity imports was higher than the same period last year. The overall level of electricity consumption was 2% higher this summer as temperatures were slightly warmer than the previous summer.

At that time, money managers surged into bullish trades. They held more positions in favor of rising prices than short prices on Aug. 30 for the first time since November 2014. Many have been betting that declining production and rising dependence on gas from power plants would erase a glut that has lingered in storage since last year.

That is occurring but not as dramatically as some expected, analysts said. Production hasn’t budged far from record highs and the latest weather forecasts, while hot, aren’t impactful enough, said Gene McGillian, research manager at Tradition Energy. Summer demand is tightly tied to weather and how much people run their air conditioners, consuming gas-fired power.

Natural Gas Weekly Weather Outlook (www.natgasweather.com)

As the weather pattern transitions to La Niña this fall, warm weather is predicted across much of the eastern United States. Meanwhile, developing dryness and worsening drought conditions will grip the majority of the western U.S. The Northwest may mark the only exception where cooler air will rule as a result of frequent showers. Those anticipating the turn to cool fall weather will have to wait longer than usual this year as a warm, dry start to the season is in store for the Northeast and mid-Atlantic.

Typical cool shots will hit the region at times in October and November, but prolonged chilly weather will wait until late in the fall for most areas. “As far as Philadelphia and New York City, I would expect that you’re not going to see many arctic shots or cold shots to spoil your plans here in the fall,” AccuWeather Expert Long-Range Forecaster Paul Pastelok said.

“The only days that really may be cool are those that are wet. If the season follows our predictions, we’re not expecting too many of those coming up,” he said.

The warm, dry conditions will lead to a promising harvest season for farmers and excellent weather for those attending fall festivals. Leaf peepers may get the short end of the stick, however.

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WEEKLY

Natural Gas Weekly Update
Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)

Weekly Natural Gas Storage Report
Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)

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