Weekly natural gas cash prices dropped again – as they have each week in September – in the wake of demand destruction imposed by Hurricane Ian in the Southeast along with benign weather across most other regions of the Lower 48.
NGI’s Weekly Spot Gas National Avg. for the Sept. 26-29 trading period for delivery through Sept. 30 shed $1.175 to $5.310/MMBtu.
Mild weather canvassed most of the northern United States throughout the week, easing demand, and Ian punctuated the pressure on prices when it pummeled Florida’s western coast on Wednesday. The storm then drenched central Florida on Thursday before moving up the East Coast on Friday, bringing torrential rains, storm surges and powerful winds that caused widespread power outages and diminished natural gas consumption.
When trading culminated for the week on Thursday for gas delivery through Sept. 30, prices in the East, in particular, were deep in the red. FGT Citygate was down $2.320 to 6.785 on the four-day trading week, while Transco Zone 5 was off $1.520 to $6.515 and Cove Point was down $1.695 to $5.875.
“We are in the heart of hurricane season,” and “Ian is a bleak reminder,” said Rystad Energy’s Emily McClain, vice president.
The November Nymex contract, which took over as the prompt month on Thursday, also lost ground amid the carnage caused by Ian. It settled at $6.766/MMBtu to close the trading week on Friday. It was down 10.8 cents on the day and down 1% from the front month finish the prior week.
Ian made landfall as a Category 4 hurricane Wednesday just west of Fort Myers, packing sustained maximum winds of 155 mph, according to AccuWeather. Only four hurricanes on record have made landfall over the Lower 48 with even greater sustained winds, the firm said.
AccuWeather forecasters warned that Ian could bring destructive winds and flooding to Georgia, South Carolina, North Carolina and Virginia as well as stormy conditions as far north as New Jersey before the next trading week commences.
Elsewhere, forecasters looked for high temperatures in the week ahead to hover in the 70s and 80s across large swaths of the Mountain West, Midwest and Northeast – extending the shoulder season’s stretch of modest demand.
“Our view remains that weather demand will generally remain quite light” well into October, NatGasWeather said.
Robust production and a stout storage increase also provided cover for bears.
Output during the past week held around 100 Bcf/d, within striking distance of the 101 Bcf/d record reached earlier in September, according to Bloomberg estimates.
Robust production played a big role in the latest U.S. Energy Information Administration (EIA) storage report, released Thursday. EIA posted an injection of 103 Bcf into storage for the week ended Sept. 23. The result matched the prior week’s print and the peak for the season.
Prior to the report, major surveys showed analysts expecting a mid-90s Bcf increase. EIA recorded an injection of 86 Bcf a year earlier. The five-year average injection was 77 Bcf.
The latest injection boosted inventories to 2,977 Bcf. That left stocks below the five-year average of 3,283 Bcf. But, with production strong and weather demand waning, analysts expected ongoing plump increases that would narrow the deficit to historic norms and leave inventories at ample levels for an average winter.
EBW Analytics Group senior analyst Eli Rubin said between the latest print and the next five to follow, storage injections could average 97 Bcf/week – 25 Bcf/week greater than the five-year normal. “Sinking deficits could spell further downward pressure for natural gas” prices, he said.
Farther out, however, continued strong U.S. production levels may be needed to meet demand over a prolonged winter while also meeting Europe’s heightened needs for LNG.
Production has climbed in the Haynesville Shale, in particular, as exporters call for more gas to ship to Europe, RBN Energy LLC analyst Sheetal Nasta said. The continent is buying all the liquefied natural gas it can to offset lost Russian imports amid the Kremlin’s war in Ukraine.
More LNG facilities are in the works and are expected to support the upward output trajectory, Nasta said.
“The battle to restore energy reliability in Europe has breathed new life into North American LNG export projects — and into the Haynesville Shale in Louisiana, the closest supply basin to many of the planned and proposed liquefaction facilities,” Nasta said. “Gas production in the region has climbed more than 4 Bcf/d — an impressive 39% — since 2019 and we expect it to grow nearly as much over the next three years.”
Friday Cash Crumples
Spot gas prices slipped throughout the Lower 48 on Friday for weekend through Monday delivery, led lower by drops in the Ian-devastated Southeast. NGI’s Spot Gas National Avg. shed 59.5 cents on the day to $4.535.
NatGasWeather said forecasts as of Friday guided toward chilly overnight weather in northern markets during the week ahead, adding some heating demand. Still, this likely would not prove enough to offset rapidly fading cooling needs.
The firm noted that heavy rains and gusty winds from Ian were expected to drench the Mid-Atlantic Coast over the weekend. The rest of the country was forecast to be “comfortable with highs mostly in the 60s to 80s besides locally hotter 90s in the California and Southwest deserts.”
A “warmer-than-normal pattern will rule” most of the Lower 48 in the week ahead, though at this time of year that translates into mild weather and modest natural gas demand, NatGasWeather added.
“Where notably cooler trends have occurred is for Oct. 7-10 as cooler-than-normal weather systems sweep across the Great Lakes and Northeast with highs of 50s and 60s, lows of upper 20s to lower 40s,” the firm said. Still, this is expected to be offset by “exceptionally comfortable” temperatures across the rest of the country.