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James Hyerczyk
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Natural Gas

Natural gas futures finished nearly unchanged on Thursday following the release of an unimpressive weekly government storage report. The market actually edged higher before the report on speculative bets for a storage build in the low 30’s, but those traders reduced their bullish bets after the report disappointed. Bullish traders were hoping for the lower number because this would have indicated tighter supply/demand conditions.

On Thursday, October natural gas futures settled at $2.481, down $0.004 or -0.16%.

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According to Natural Gas Intelligence (NGI), “Markets looked past improved U.S. liquefied natural gas (LNG) export demand and a light storage report to the expected onset of fall weather, eased cooling demand and the likelihood of more robust stockpile injections in coming weeks.”

U.S. Energy Information Administration Weekly Storage Report

The EIA weekly storage report showed a build of 35 Bcf for the week-ending August 28.

According to the EIA, working gas in storage was 3,455 Bcf as of Friday, August 28. This represents a net increase of 35 Bcf from the previous week. Stocks were 538 Bcf higher than last year at this time and 407 Bcf above the five-year average of 3,048 Bcf. At 3,455 Bcf, total working gas is above the five-year historical range.

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LNG Feed Demand Update

Traders are looking to continued improvement in LNG feed gas demand to offset anticipated declines in gas-powered air conditioner use.

“We expect LNG feed gas will be the big story ahead of and during the long Labor Day weekend break, specifically whether Sabine Pass LNG feed gas resumes,” NatGasWeather said.

Short-Term Weather Outlook

According to NatGasWeather for September 3 to September 9, “Comfortable conditions continue over the Midwest and Ohio Valley with highs of 60s to low 80s. Hot high pressure over the West will bring highs of upper 80s to 100s. The East will warm into mid-80s to low 90s as high pressure builds in for a modest bump in national demand. However, strong cool shots will arrive into the central US next week with highs of only upper 50s to 70s, including deep into Texas and the South with 80s.”

Short-Term Forecast

We’re looking for short-term demand to remain relatively tame due to the onset of cooler temperatures. This could keep a lid on any rallies and extend the selling especially if LNG feed gas demand remains low.

Once LNG demand begins to pick up, prices could stabilize as the news will likely offset the expected weather driven drop in demand.

Since temperatures are expected to cool, we could see a surge in weekly builds ranging from 60-75 Bcf this week and 80-95 Bcf in the next week.

A combination of heat and renewed LNG demand will be necessary to trigger a resumption of the uptrend.

For a look at all of today’s economic events, check out our economic calendar.
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