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James Hyerczyk
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Natural Gas

Natural gas futures are trading higher as volatility has moved to the forefront with traders facing multiple issues including a major Category 4 hurricane, weekly government storage data and a September futures contract expiration.

At 13:40 GMT, October natural gas futures are trading $2.621, up 0.047 or 1.83%.

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Hurricane Update

Hurricane Laura made landfall near Cameron, Louisiana, as a Category 4 storm in the early morning hours Thursday. Laura approached land with maximum sustained winds of 150 mph, according to the National Hurricane Center (NHC).

The NHC added that as of 8 a.m. ET, “damaging winds and flooding rainfall” were spreading inland over western and central Louisiana, and “life-threatening storm surge” was continuing “along much of the Louisiana coastline.”

“On the forecast track, Laura will move northward across western and northern Louisiana through this afternoon,” the forecaster said. “The center of Laura is forecast to move over Arkansas tonight, the mid-Mississippi Valley on Friday, and the Mid-Atlantic states on Saturday.”

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Production has ‘Completely’ Shut Down

Hurricane Laura has essentially shut down production in the Gulf of Mexico, Genscape Inc. analyst Nicole McMurrer said in a note to clients early Thursday.

“This morning we are seeing additional production declines” in the Haynesville Shale, South Louisiana and South Texas, McMurrer said.

McMurrer further added, “Power demand will be negatively impacted as hundreds of thousands are without power.”

EBW Analytics Group said, “The loss of demand for natural gas is likely to be significantly greater than was anticipated just 24 hours ago, especially if Sabine Pass or Cameron are forced to stay offline for an extended period. This could create significant downward pressure on the front end of the curve, especially at a time when demand for gas was already expected to decline.”

U.S. Energy Information Administration Weekly Storage Report

We’re looking for a build in today’s EIA storage report of 39 Bcf for the week-ending August 21.

Natural Gas Intelligence (NGI) is reporting that a Bloomberg survey as of Wednesday showed injection estimates ranging from 39 Bcf to 58 Bcf, with a median of 44 Bcf. A Wall Street Journal poll had the same range and arrived at an average 46 Bcf injection, while the median of a Reuters poll with the same range produced a 47 Bcf build. NGI projected a smaller 43 Bcf injection.

Daily Forecast

The demand news is bearish and the EIA numbers aren’t expected to be bullish, but the market is going up. This could be a function of the futures contract expiration. But all it is really telling us is to expect volatility.

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