US natural gas futures rise to fresh 7-week high on warm weather in Southeast

04 Sep, 2019

Front-month gas futures for October delivery on the New York Mercantile Exchange were up 4.6 cents, or 2.0pc, to $2.404 per million British thermal units (mmBtu) at 11:34 a.m. EDT (1534 GMT).

On Tuesday, the contract closed at its highest level since July 15.

That kept the contract in overbought territory for a second day in a row for the first time since November 2018.

The increase in US prices also pushed next-day gas at the Henry Hub benchmark in Louisiana over Britain's day-ahead National Balancing Point (NBP) for the first time since January 2018.

Traders, however, noted the LNG market looks at prices two or more months in the future since many buyers of US LNG have to give suppliers about two months notice before cancelling a cargo. NBP prices for November were still trading about $2.60 per mmBtu over Henry Hub futures for November.

The US National Weather Service projected temperatures would remain well above normal in Texas and the Southeast in both its 6-10 day and 8-14 day outlooks.

Despite the warmer forecasts for the South, data provider Refinitiv cut its projection for average gas demand next week from 86.4 billion cubic feet per day (bcfd) on Tuesday to 85.5 bcfd on Wednesday with power generators expected to burn less fuel to meet lower air conditioning use.

That compares with a demand forecast of 88.0 bcfd during the warmer weather this week.

In the Atlantic, the wreckage of pulverized homes, beached boats and floodwaters covered miles of the Bahamas in Hurricane Dorian's wake on Wednesday, as the storm heads for Florida and Georgia. So far Dorian has only caused about 12,000 homes and businesses to lose power in Florida and Georgia.

Gas flows to US LNG export plants, meanwhile, slipped to a near two-week low of 5.8 bcfd on Tuesday due to planned maintenance on Train 5 at Cheniere Energy Inc's Sabine Pass facility in Louisiana, down from a record high of 6.8 bcfd last week.

Freeport LNG, meanwhile, shipped the first cargo from its Freeport LNG export facility in Texas on the LNG Jurojin tanker on Tuesday.

Gas production in the Lower 48 states, meanwhile, slipped to 92.6 bcfd on Tuesday from 92.8 bcfd on Monday, according to Refinitiv.

That compares with an all-time high of 93.0 bcfd on Aug. 19.

Analysts said utilities likely added 79 billion cubic feet (bcf) of gas into storage during the week ended Aug. 30.

That compares with an injection of 64 bcf during the same week last year and a five-year (2014-18) average build of 66 bcf for the period.

If correct, last week's increase would boost stockpiles to 2.936 tcf, 2.9pc below the five-year average of 3.023 tcf for this time of year.

The amount of gas in inventory has remained below the five-year average since September 2017.

It fell as low as 33pc below that average in March 2019. But with production expected to keep growing, analysts said, stockpiles should reach a near-normal 3.7 trillion cubic feet (tcf) by the end of the summer injection season on Oct. 31.

Copyright Reuters, 2019

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