Natural gas futures sputtered early on Monday as a powerful storm barreled into the Southeast, cooler northern weather arrived, and supplies in storage held at stout levels.
The September Nymex gas futures contract was down 7.5 cents to $1.892/MMBtu at around 8:40 a.m. ET.
Hurricane Debby made landfall in western Florida as a Category 1 storm early Monday. It delivered powerful, cooling winds that could cause extensive power outages as well as drenching rains of up to 30 inches. The heavy rains were forecast to affect Georgia and the Carolinas as well, according to the National Hurricane Center (NHC).
"This potentially historic rainfall may result in areas of catastrophic flooding," NHC’s Richard Pasch, a hurricane specialist, said in an advisory. He warned of a "life-threatening situation."
Additionally, NatGasWeather said that, while widespread heat was expected to drive strong demand across much of the Lower 48 this week, there were other notable exceptions. Parts of the Upper Midwest and Great Lakes could see highs in the 60s and 70s. Greater portions of the Midwest, Plains, Ohio Valley and 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.
Looking at the supply side of the natural gas market, prices were under pressure most of July and into the start of this month because of strong production and robust amounts of gas in storage.
Wood Mackenzie on Monday pegged production at 102.6 Bcf/d, in line with the prior seven-day average and up from spring lows in the 90s Bcf/d.
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 a 16% surplus relative to the five-year average.
Looking ahead to Thursday's EIA report, covering the week ended Aug. 2, preliminary estimates submitted to Reuters ranged from injections of 11 Bcf to 39 Bcf, with an average of 30 Bcf. The estimates compared with a five-year average increase of 38 Bcf.
“With less than three months remaining in the injection season, the market requires very tight fundamentals to fit surpluses into storage,” said EBW Analytics Group’s Eli Rubin, senior analyst.
“While modest upside is possible” if surpluses decline this month, “risks abound,” Rubin added. “Natural gas is only one hurricane or weather collapse from another leg lower. Recent history also suggests questions with the willingness to build October storage above 3,900 Bcf. As a result, even bullish near-term developments may fail to lift natural gas.”
