Natural Gas Monthly Fundamental Forecast – September 2016

Natural Gas is moving into its in between season with summer demand ending and winter heating unnecessary for the next 60 days. NG is trading at 2.881 with a gain of 4% for the month and is expected to climb a bit higher before it parks in between seasons. Natural gas rose 6 cents, or 2.12%, to $2.887 a million Brutish thermal units on the New York Mercantile Exchange as the month closed. Tropical Storm Hermine gained strength Wednesday as it headed toward Florida, and the National Hurricane Center said it is poised to be near hurricane strength by the time it makes landfall.

While the storm appears to be moving away from natural gas production and pipelines further west in the Gulf, the government’s Bureau of Safety and Environmental Enforcement said Wednesday that companies have shut in some 10.59% of natural gas production in the gulf waters. Even so, the Gulf now accounts for a smaller share of natural gas production in the U.S., as onshore production from shale rock has boomed in recent years.

U.S. storage levels also remained in focus. Market players looked ahead to weekly supply data due on Thursday, which is expected to show a build of approximately 25 billion cubic feet. That compares with a gain of 11 billion cubic feet in the preceding week, 96 billion a year earlier and a five-year average of 67 billion cubic feet.

Total gas in storage currently stands at 3.350 trillion cubic feet, according to the U.S. Energy Information Administration, 8.3% higher than levels at this time a year ago and 8.2% above the five-year average for this time of year.

Some market analysts said persistent heat late into the season could push power generators to continue burning gas. Unless intense late-summer heat boosts demand from power plants, stockpiles could possibly test physical storage limits of 4.3 trillion cubic feet at the end of October.

The Three-Month Forecast

In general, we expect the warm pattern from the summer to persist into the fall. This should mean above normal temperatures will be widespread well past Labor Day.

September’s forecast shows a rather expansive swath of warmer-than-average temperatures from California, through Texas, to the Southeast coast. Above-average temperatures will extend northward from the Southeast to the Great Lakes and up the entire Eastern Seaboard. The only locations in the Lower 48 that may see near or slightly cooler-than-average conditions in September will be the northern Rockies to the northern Plains.

Conditions in October are expected to be quite similar to September, but near-average temperatures are expected across much of the Southwest and in the northern Plains. Cooler than average temperatures will be possible on the west coast as we get into October.

After transitioning to neutral conditions, it’s possible that sea-surface water temperatures in the equatorial east and central Pacific Ocean could continue to cool to the point that La Niña may emerge in the fall, NOAA said. However, they cautioned that much uncertainty remains, though there is computer model and physical evidence that La Niña conditions could develop.

La Niña is the opposite of El Niño, namely, a cooling of the equatorial east-central Pacific Ocean.

Of course, if La Niña does develop, the strength of it (weak, moderate or strong) will determine what impacts it may have on the weather in North America and elsewhere next winter (2016-2017). The downward trend in the graph lines from left to right below illustrates the computer model forecast for cooling SSTs through spring, summer and into next fall.

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