Natural Gas Price Fundamental Daily Forecast – Prices Retreat as Power Outages Drive Down Demand

Natural gas futures are trading nearly flat on Monday after giving back earlier gains as Hurricane Ida weakened after forcing shutdowns of U.S. gas production. About 2% of total U.S. gas comes from the federal offshore Gulf of Mexico, while another 8% comes from on- and offshore Louisiana, according to federal data.

At 11:52 GMT, October natural gas futures are trading $4.392, up 0.004 or +0.09%.

With Hurricane Ida moving far away from the Gulf of Mexico, the focus is no longer on what kind of damage it could do to what it actually did.

As we can see from the early price action, not all hurricanes are outright bullish. Storms in the Gulf of Mexico like Ida can reduce gas prices and demand by causing power outages and LNG terminals to shut, but they can also boost prices by knocking Gulf Coast production out of service.

More Than 1 Million Louisiana Utility Customers are Left Without Power

Hurricane Ida made landfall in Louisiana on Sunday as a Category 4 storm with winds of 150 miles per hour, one of the strongest storms to hit the region since Hurricane Katrina, the National Oceanic and Atmospheric Administration said.

As of early Monday, more than 1 million Louisiana utility customers are without power, according to PowerOutage. On Sunday evening, New Orleans said the entire city lost power after “catastrophic transmission damage.”

Daily Forecast

We’re watching the price action very closely because of the possibility of a potentially bearish closing price reversal top. We suspect speculative buyers came in early after the pre-market opening to drive prices into more than a 32-month high. They were betting on a bullish outcome.

After that early surge, however, traders started to get reports on the damage. The most obvious was the loss of electrical power. Prices started to retreat when that occurred. No power means no natural gas demand to run nuclear power plants.

The next market moving event will be the assessment of damage to the natural gas production facilities and if there will be any problems with liquefied natural gas (LNG).

Any news that affects the delivery or demand for LNG will be bearish. Prices are likely to stabilize or could move higher if the hurricane didn’t cause damage to any LNG facilities.