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James Hyerczyk

Natural gas futures are trading marginally higher on Tuesday shortly after the regular session opening. Although prices are up for the session, they are actually coming down from the high. This could be a sign of profit-taking following yesterday’s surge, or that the short-covering rally has run its course. We also suspect that traders could be pricing in the possible impact of a hurricane later in the week that could cut production and exports of liquefied natural gas (LNG).

At 12:47 GMT, December natural gas futures are trading $3.199, up $0.038 or +1.20%.

After last week’s steep sell-off, the market posted a strong rebound on Monday due to stronger LNG demand and strong cash prices.

Daily December Natural Gas

Stronger LNG Demand Could Reduce Storage Fears

Helping to boost prices on Monday was the news that an LNG tanker had arrived at Sempra Energy’s Cameron terminal over the weekend, according to Natural Gas Intelligence (NGI). “The Hackberry, Louisiana facility had been shut down since late August, ahead of Hurricane Laura’s landfall, and had finally resumed operations last week,” NGI said.

Nonetheless, issues remain. “The speed with which Sempra will be able to ramp up production at Cameron remains unclear,” said EBW Analytics Group.

EBW added, with Freeport operating three trains, though, and Sabine Pass already close to 4 Bcf/d, the return of feed gas at Cameron could “start to tighten up the cash market and reduce fears regarding the continued increase in South Central storage,” the firm said. This should allow the forward curve to recover a “significant share” of its recent losses.

Before you get too excited, Powerhouse analysts said the storage overhang is too steep to brush aside. Chairman Alan Levine pointed out that the average rate of injections into storage is 6% higher than the five-year average so far in the refill season, which runs through October 31, NGI reported.

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Daily Forecast

We’re looking for heightened volatility to emerge the rest of the week as traders begin to track Hurricane Delta, while trying to assess its potential impact on natural gas. The storm is currently forecast to make landfall in Louisiana early Saturday morning as a Category 2 storm. At this time, however, there is still large uncertainty in the track and intensity in forecasts.

Furthermore, while lower production resulting from the expected storm could boost prices, weaker power burns stand to deliver a blow, according to Bespoke.

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

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