Natural Gas Price Fundamental Daily Forecast – Quick Restoration of Power after Hurricane Could Fuel Short-Covering Rally

Natural gas futures are trading slightly better early Monday. The move represents a change in the fundamental outlook presented in our weekly forecast a little more than 24 hours ago. At that time, the impact of Hurricane Florence suggested that due to flooding concerns, there would be delays in restoring power. However, this has not been the case. Power is being restored at a much faster pace than previously thought although demand is still down.

At 0901 GMT, November Natural Gas is trading $2.766, up $0.015 or +0.55%.

According to S&P Global Platts, “Power demand across the Carolinas started to show a strong rebound.”

“Of more than 1.3 million in outages attributed to Florence and its aftermath on Saturday, service by Sunday had been restored to more than half of Duke Energy customers, who bore the brunt of the storm’s fury”, according to Platts.

Florence hit the Carolinas as a Category 1 hurricane on Friday. Since then it has been downgraded to a tropical depression. Although the wind speed has dropped, heavy rain and flooding has persisted. These conditions condition to be a drag on demand.

Forecast

Florence is now a slow moving tropical depression. It is expected to continue to drop massive amounts of rain across a wide area which raises the chances of severe flooding. While power is being restored very quickly, there is the possibility that several areas will remain without power for some time. Additionally, those areas had power restored, still face the possibility of additional outages.

As conditions improve in the areas affected by the hurricane, the focus for traders will shift back to the national weather forecast.

According to NatGasWeather.com for September 17 to 23, “Tropical system Florence will bring rain across the Mid-Atlantic and Northeast in the coming days as it ejects out of the Southeast. In its wake, very warm high pressure will set up over much of the country this week with highs of 80s and 90s over the southern U.S. and 70s and 80s over the northern U.S. besides the cooler Northwest. A weak system continues to bring heavy showers over West Texas for local cooling. Overall, demand will be a little stronger than normal over the next week due to 90s returning to most southern U.S. states.”

If we assume that some of the heavy selling pressure we saw on Friday was due to speculation that the hurricane would lead to a prolonged period of low demand, then the quick restoration of power in some areas is likely to trigger a short-covering rally today.