Natural Gas News: Can LNG Feedgas Hold Off Permian Supply This Week?

Storage and Feedgas Gave the Bulls Their Best Week Since April

October natural gas gained 2.97% last week on the tightest storage injection of the refill season and the strongest LNG feedgas numbers in four months. The contract ran from $2.77 to $2.990 Thursday after the EIA report landed well below expectations. Friday gave some of that back. Sellers showed up right at $3.00 with the Hugh Brinson pipeline set to start moving Permian gas on September 1. The demand side delivered last week. The supply side answers this week.

October natural gas settled the week at $2.881, up $0.083.

15 Bcf Was the Number That Moved the Market

The EIA reported a 15 Bcf injection for the week ended August 21. The market expected 20 Bcf. The five-year average for the same week is 33 Bcf. That was the smallest injection of the refill season and the bulls ran with it Thursday.

South Central salt caverns fell 20 Bcf. Texas power plants were still burning hard for cooling and several Texas and desert hubs printed above $11 last week. The East and Midwest added to storage but that did not matter much. The 20 Bcf South Central draw was the number that drove the report.

The surplus to the five-year average dropped to 167 Bcf from 185 Bcf. Still above normal. Moving in the right direction for the first time in weeks.

Freeport LNG finished its two-month turnaround on August 27 and started pushing nominations back toward 2 Bcf per day. Corpus Christi came back the same week. Combined feedgas hit 18.5 to 19.2 Bcf per day, the highest since April. Golden Pass continued commissioning and added incremental pull each day.

EU storage sat near 64% full at the end of August, the lowest late-August level in more than a decade. Germany was closer to 52%. TTF around €67. U.S. cargoes are not losing buyers anytime soon.

The weather models keep the Plains, South and East warmer than normal through early September. They disagree on the Midwest. The GFS shows a cooler break near Chicago midweek. The ECMWF holds more cooling degree-days. South Central stays hot on both.

Production Is High and the Pipeline Makes It Worse for Bulls

Lower-48 production held in the 111 to 113 Bcf per day range last week. Rig counts climbed again. Producers have not backed off below $3.00 and they are about to get more room.

Energy Transfer’s Hugh Brinson pipeline starts September 1. The line moves 2.2 Bcf per day of Permian gas that has been trapped near Waha toward East Texas and Henry Hub. Friday’s pullback from $2.990 already reflected part of that story before the first molecule hit the pipe. The gas that has been stuck near the wellhead now has a shorter path to the pricing point that sets the benchmark.

Westcoast T-South constraints in British Columbia lifted Sumas prices last week. Enable’s force-majeure outage earlier in the month trimmed Midcontinent flows. A few Northeast wells stayed offline on pipeline constraints. Those are regional spread stories. None of them touched the national production number.

Weekly October Natural Gas Futures Technical Analysis

October natural gas futures closed higher last week after a spike to the upside turned the minor trend to up on the weekly swing chart. A trade through $2.990 will reaffirm the minor trend to the upside. Taking out the swing bottom at $2.668 will change the minor trend to down.

The short-term range is $3.420 to $2.668. Its retracement zone at $3.044 to $3.133 is the primary upside target. With the main trend down, bearish traders are likely to sell an initial rally into the zone. Overtaking the upper, or 61.8% level, at $3.133 could indicate the presence of buyers. This could trigger an acceleration to the upside, with the first key target the swing top at $3.420.

A trade through $3.420 will change the main trend to up. The initial move through this level could create the momentum needed to challenge the long-term 52-week moving average at $3.510 and the long-term retracement zone at $3.564 to $3.775.

On the downside, the minor range is $2.668 to $2.990. Fifty percent of this range at $2.829 is a key downside target. If this market is going to move higher, new buyers may have to step in on a test of this level in order to fuel a reversal to the upside.

What to Watch

Thursday’s storage report for the week ended August 28 lands the same week the Hugh Brinson pipeline goes live. Freeport just came back. Corpus Christi just came back. Combined feedgas is running at the highest level since April. All of that happened at once and the market still could not hold $3.00 on Thursday. Friday gave it right back. The supply side is not waiting.

The minor trend flipped up last week but the main trend has not turned. A push above $3.00 runs straight into the retracement zone. The market held $2.829 on the last pullback and that is the level that matters if sellers come back this week.

More Information in our Economic Calendar.