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James Hyerczyk
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Natural Gas

Natural gas futures are trading sharply higher for a third straight session this week as supply worries continue to drive strong demand in anticipation of inadequate inventory levels as we get closer to the start of the winter heating season.

At 13:46 GMT, December natural gas futures are trading $5.620, up $0.222 or +4.11%.

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Bespoke Weather Sees Significant Running Room for Liquefied Natural Gas

Bespoke Weather Services is pointing out strong gains in Henry Hub futures which coincide with rallying prices overseas and storage adequacy concerns both at home and abroad, Natural Gas Intelligence reported.

“Natural gas prices are (surprise, surprise) up sharply this morning seemingly piggybacking off European prices, which have been up more than 10% so far today,” Bespoke told clients in a note early Wednesday. “…It is all fear in the market, owning to storage levels that are viewed as less than sufficient in the event of a cold winter, not just here in the U.S., but even more so over in Europe.

“It makes it very difficult to say when this rally could end, or how high we can go, as we have tons more upside potential if the market begins to worry more about the possibility of having to price out LNG this winter.”

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Wood Mackenzie Sees Some Tropical Storm Nicholas Impact on LNG Export Operations

Natural Gas Intelligence reported that according to Wood Mackenzie, Tropical Storm Nicholas appears to have had at least some impact on LNG export operations. On Tuesday, the firm notified clients when it observed evidence that all three trains at the Freeport LNG facility had turned off.

“Power outages are the most likely culprit,” Wood Mackenzie analyst Kara Ozgen said, noting that the local power outage rate near the Freeport terminal “reached 75% yesterday morning. Also supporting this idea was Centerpoint Energy’s outage map, which showed that there were power outages in the same area where Freeport LNG is situated.”

Short-Term Outlook

Thursday’s Energy Information Administration (EIA) weekly storage report “will begin the string of more robust shoulder season injections,” Energy Aspects said in a note to clients. However, this is not likely to stop the rally because speculators are focused on an even longer-term picture that carries into at least the start of the winter heating system.

Ahead of the EIA report, Energy Aspects are estimating a 74 Bcf build for the week-ended September 10.

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