Natural Gas Price Fundamental Daily Forecast – Supported by Rising LNG Demand; Capped by Hurricane Uncertainty

Natural gas futures are trading nearly flat shortly before the regular session opening on Wednesday as traders continue to assess the impact of Hurricane Sally as it makes landfall along the U.S. Gulf Coast, moving away from major off-shore facilities.

The hurricane has shut more than a quarter of U.S. offshore Gulf of Mexico oil and gas production and stirred heavy seas that closed ports from Louisiana to Florida. It moved at a snail’s pace toward a Wednesday landfall on the coast between Mississippi and Florida.

At 11:46 GMT, December natural gas is trading $3.163, up $0.005 or +0.16%.

Spot gas prices are trending lower as cooler winds prevail due to the hurricane, and fall temperatures blanket the eastern half of the country.

Perhaps propping prices up is the pick-up in LNG export demand. According to reports, LNG volumes held above 7.0 Bcf as trading got underway Tuesday. With the hurricane a great distance from the Sabine Pass LNG terminal, and conditions in the Gulf of Mexico calming, demand could hold steady-to-better on Wednesday.

Meanwhile, production had dropped 770 MMcf/d between Sunday and early Tuesday, according to estimates from Genscape Inc. Several pipelines announced evacuations and flow restrictions as Sally pushed into the region.

Short-Term Weather Outlook

According to NatGasWeather for September 16 to September 22, “High pressure continues to rule most of the U.S. with highs of 70s and 80s, except hotter 90s-100s over areas of the West. The eye of Hurricane Sally made landfall overnight along the Southeast Gulf Coast with gusty winds and heavy rain, but with comfortable highs of low 80s. Sally will drift across the Southeast the next few days with heavy rain. A decent cool shot will race across the Midwest and Northeast Thursday thru Saturday with showers and highs of upper 50s to lower 70s, although mostly comfortable elsewhere besides the hotter Southwest, Overall, national demand will be moderate to low.”

Daily Forecast

Hurricane Sally is the main focus today. With the hurricane moving away from major facilities, production could get back to normal quickly. Meanwhile, LNG exports are also expected to continue to rise. These factors are supportive.

With the hurricane comes cooler temperatures and expectations of lower demand. This news could weigh on prices.

Given the two scenarios, traders may take a day or two to determine the next major move. This could lead to a rangebound trade.

Traders will also be monitoring the widely expected floods that could limit demand and at the same time shutdown pipelines and production facilities.

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