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James Hyerczyk
Natural Gas

Natural gas futures are trading higher on Wednesday shortly after the cash market opening as traders continue to assess the possible impact of Hurricane Delta on production. On Tuesday, prices took a hit after the threat of the hurricane striking Gulf Coast facilities later this week increased significantly.

According to Natural Gas Intelligence (NGI), “Like Hurricane Laura in August, Hurricane Delta is poised to quickly sap the momentum building in liquefied natural gas (LNG) demand. The Category 4 storm is expected to make landfall in Louisiana early Saturday, less than two months after Laura devastated Lake Charles, LA.”

At 12:37 GMT, December natural gas is trading $3.165, up $0.069 or +2.23%.

Short-Term Weather Outlook

According to NatGasWeather for October 7 to October 13, “The northern US will be mostly comfortable today with highs of upper 60s and 70s, then cooling across the Great Lakes and Northeast Thursday – Saturday as a weather system sweeps through with highs of 50s and 60s, lows of 30s and 40s.

The rest of the US will be warm to very warm with highs of 70s and 80s besides the hotter Southwest into California with 90s to 100s. Most of the US will be comfortable this weekend and early next week besides the Northwest and Northern Plains as weather systems bring showers and cooling. Overall, national demand will be low.”


Daily Forecast

Today’s early price action suggests investors should be prepared for two-sided trading until the path of Hurricane Delta is clarified.

We’re expecting some loss of LNG demand because facilities are being evacuated in the Gulf of Mexico as a precaution. These operators don’t wait. When a tropical storm enters the Gulf of Mexico, they begin shutting down. However, the path of the hurricane then become most important.

Several weeks ago Hurricane Laura directly hit natural gas facilities, prompting an extended shutdown do to extensive repairs. The lower demand created by this event drove down natural gas prices.

This time, the path of Hurricane Delta is expected to miss the facilities so there would be no need for an extended shutdown or extensive repairs.

Bespoke Weather Services suspects some LNG volumes would drop off in light of the storm, however, at this time, it does not expect a direct hit on any of the facilities, “as it is typically more difficult by this time of the year to get a major hurricane hit in the western Gulf.”

Basically, we expect to see lower prices if natural gas facilities take a direct hit, but higher prices if the hurricanes misses and LNG demand remains solid.

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