Natural Gas Price Fundamental Daily Forecast – Price Action Suggests Minimal Storm Damage to Facilities

Natural gas futures are edging lower early Tuesday even though U.S. liquefied natural gas (LNG) demand strengthened and rapidly approaching Hurricane Sally led to a number of production shut-ins in the Gulf of Mexico. Forecasters are saying that Sally could strike the coasts of Mississippi and Alabama on Tuesday, while the southeast corner of Louisiana was also susceptible.

At 09:42 GMT, December natural gas is trading $2.729, down $0.011 or -0.40%.

Short-Term Weather Outlook

According to NatGasWeather for September 15-21, “High pressure will rule most of the U.S. the next few days with highs of 70s and 80s, except hotter 90s-100s over areas of the West. Tropical cyclone Sally will bring gusty winds and heavy rain to the Gulf Coast today as it makes landfalls, then drifts across the Southeast Wednesday. During the second half of the week a cool shot will race across the Midwest and Northeast with showers and highs of upper 50s to lower 70s, while mostly comfortable elsewhere besides the hotter Southwest. Overall, national demand will be moderate to low.”

LNG Demand Updates

After Hurricane Laura caused extensive damage in Louisiana, knocking out power and forcing key LNG terminals offline, the Sabine Pass LNG terminal has ramped up activity. However, the Cameron LNG terminal in Louisiana was still offline Monday. Neither appeared to be in Sally’s path, which is helping to drive demand since it appears to be business as usual in the region.

Bespoke Weather Services estimated LNG volumes over the weekend at 7.5 Bcf, though the forecaster still sees containment risks, given looming cooler weather and the potential for second waves of the virus.

Daily Forecast

It looks as if Hurricane Sally is going to miss key facilities so production is not likely to be affected too much over the next several days. Higher LNG demand could provide some support, but it may not be enough to offset the lower demand due to cooler temperatures.

The big concern this week remains the strong possibility of containment issues. If storage continues to grow then this will pressure prices since producers may start to dump natural gas in the spot market at below-market prices.