James Hyerczyk
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Natural Gas

Natural gas futures continue to soar on Tuesday as traders bet new Hurricane Nicholas will do further damage to Gulf of Mexico production facilities which could hamper supply/demand balances at a time when gas storage for winter heating is at extremely low levels.

At 12:46 GMT, December natural gas futures are trading $5.475, up $0.109 or +2.03%.

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Hurricane Nicholas formed late Monday in a region still reeling from the damage from Hurricane Ida. According to the government, more than one-half of the natural gas produced in the Gulf of Mexico pre-Ida remained offline Monday. Ida mad landfall in Louisiana on August 29.

The potential for flooding to force more production offline is bringing in the speculative buyers.

Liquefied Natural Gas Exports Threatened

Hurricane Nicholas also could threaten liquefied natural gas (LNG) exports out of Corpus Christi early this week, analysts at EBW Analytics Group said Monday. However, LNG demand is strong and exports were expected to bounce back quickly, barring massive damage. LNG feed gas volumes hovered around 11 Bcf the past week, near record levels, as demand from both Europe and Asia is consistently elevated amid supply shortages on both continents.

“LNG feed gas demand flows are showing a four-month high,” the EBW team said early Monday.


Early Look at This Week’s US Energy Information Administration Weekly Storage Report

Total stocks now stand at 2.923 trillion cubic feet (TCF), down 592 Bcf from a year ago and 235 Bcf below the five-year average, the government said.

For the EIA’s next print, scheduled for release Thursday, analysts are looking for a larger build. NGI estimated a 72 Bcf increase for the week ended September 10. Bespoke preliminarily estimated an injection of 79 Bcf.

The five-year average for this time of year is an increase of 79 Bcf, and for the comparable week a year earlier, EIA reported a build of 86 Bcf.

Daily Forecast

Hurricane Nicholas will track along the Texas Coast and parts of Louisiana still trying to recover from Hurricane Ida the next several days with heavy rains, strong winds, and cooling.

The storm could impact Liquefied Natural Gas (LNG) feed gas, produce power outages, as well as decrease production along the U.S. Gulf Coast due to flooding rains.

Impacts from the storm will be closely watched, especially since production in the Gulf of Mexico has been slow to recover from Hurricane Ida that tracked through nearly two weeks ago, and where it remains down 1.2 Bcf still today.

“Our storage situation remains precarious enough so that there is risk we would need to price out LNG in the event of a big cold winter, which of course would mean much, much higher prices, even from these levels,” Bespoke said. “With such a bullish backdrop, it is difficult to see what takes us lower, barring a huge gain in production, more than just getting the Gulf back online.”

Keep in mind that if Hurricane Nicholas misses key production facilities, natural gas futures could sell-off hard, back to perhaps last Friday’s close. In other words, it will erase all of this week’s gains so far.

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