Natural gas futures hovered in the red through midday trading on Monday amid waning demand – including dampening effects from Hurricane Debby – while supply flowed at steady levels. Spot prices declined in the Southeast.
Here’s the latest:
- September Nymex gas contract trading down 3.3 cents to $1.934/MMBtu as of 2:30 p.m. ET
- Debby strikes Florida, threatens ‘historic’ rains and flooding
Debby made landfall in western Florida early Monday as a Category 1 storm. It brought sustained winds of 80 mph and torrential rains that caused power outages and flooding, the National Hurricane Center (NHC) said. NHC warned Debby, which weakened to a tropical storm after moving over northern Florida before midday, could linger much of the week and cause drenching rains of up to 30 inches over the Southeast, including Georgia and the Carolinas.
"This potentially historic rainfall may result in areas of catastrophic flooding," Richard Pasch, a storm specialist with NHC said.
AccuWeather said Debby’s winds gusted to 99 mph near landfall just before 7 a.m. local time. The firm said the track and intensity of Debby along the Southeast coast will determine the severity of its impacts.
“Upper-level winds, which typically steer tropical storms and hurricanes, will be very light within this zone, which can cause the storm to nearly stall out for a time,” said AccuWeather meteorologist Brandon Buckingham. Debby could continue to drop heavy rains while in a holding pattern, he said.
The demand hits also pressured the physical market in several parts of the South.
- Henry Hub averages $1.815, down 7.5 cents, according to NGI’s MidDay Price Alert
- Cash prices at NGI’s Southeast Regional Avg. fall 3.5 cents to $1.930
Outside of the Southeast, there was a mixed weather outlook for natural gas markets, while LNG demand was steady to start the week.
NatGasWeather said peak summer heat across much of the West and South could be offset this week by Debby’s impacts as well as cooler northern conditions. Parts of the Upper Midwest and Great Lakes could see highs in the 60s and 70s. A more expansive swath, from the Plains to the Northeast, could cool into the 60s and 70s by this weekend and into next week as “weather systems track deeper into the U.S.,” the firm said.
U.S. liquefied natural gas export terminals were slated to receive 12.5 Bcf of feed gas on Monday, according to Wood Mackenzie. That was on par with the seven-day average.
“Cooling rains may be the primary bearish natural gas risk” created by Debby, said EBW Analytics Group’s Eli Rubin, senior analyst. However, depending on how long and where the storm hovers, it could interrupt export send-outs, too, he said.
- Production holds steady and near summer highs
On the supply side, Wood Mackenzie on Monday pegged production at 102.6 Bcf/d, also in line with the seven-day average and up from spring lows in the 90s Bcf/d.
With output strong and demand dissipated, “gas bulls are hopeless,” analysts at The Schork Report said.
Looking at Thursday's government inventory report, covering the week ended Aug. 2, preliminary estimates submitted to Reuters ranged from injections of 11 Bcf to 39 Bcf, with an average increase of 30 Bcf. NGI modeled a build of 30 Bcf. The estimates compared with a five-year average increase of 38 Bcf.
The U.S. Energy Information Administration (EIA) reported an injection of 18 Bcf natural gas into storage for the week ended July 26. It was below the five-year average build of 33 Bcf. Still, the print left inventories at 3,249 Bcf, or 16% above the five-year average, according to EIA.
EBW’s Rubin said a hot August is needed to winnow down that surplus. However, the current trading week could disappoint bulls.
“Technical trends point to natural gas prices falling into the low-to-mid $1.80s,” he said. “Weather-driven natural gas demand may slide 3.4 Bcf/d over the next five days as the heat wave crests and retreats.”
