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Natural gas futures continued to slide early Friday, falling below the $7 mark as traders and analysts continued to mull the implications of a larger-than-expected weekly inventory build. The October Nymex contract was down 15.6 cents to $6.933/MMBtu at around 8:55 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a 103 Bcf injection into U.S. natural gas stockpiles for the week ended Sept. 16, a print that topped both consensus and historical comparisons. The year-earlier injection was 77 Bcf, while the five-year average for the period is an 81 Bcf injection.
Total Lower 48 natural gas underground storage stood at 2,874 Bcf as of Sept. 16, down 332 Bcf (minus 10.4%) versus the five-year average.
Analysts at Tudor, Pickering, Holt & Co. (TPH) highlighted the 31 Bcf injection reported for the South Central region as the main driver of the “outsized build” for the period.
“On a weather-adjusted basis, we estimate the market was 2 Bcf/d oversupplied for the week versus roughly 1 Bcf/d undersupplied the week prior,” the TPH analysts said.
Looking at recent flow data, production “appears to have moderated from the highs” for now, with volumes averaging around 98.5 Bcf/d in recent days versus output above 99 Bcf/d earlier in the month, according to the analysts.
On the demand side, “power generation has remained a supportive driver of balances” through the first three weeks of September, with data showing overall generation up around 2% year/year and gas generation up 15% year/year, the TPH analysts said.
As of Friday, TPH’s preliminary modeling pointed toward another looser-than-average print for next week’s EIA report, suggesting a build of 92 Bcf versus the 77 Bcf five-year average.
Meanwhile, the National Hurricane Center early Friday was monitoring a tropical depression in the Caribbean that was on a path to reach the southeastern Gulf of Mexico next week, strengthening along the way.
NatGasWeather said the system represents a “wild card” for natural gas markets.
“The overnight data continues to support the system becoming a hurricane, then with potential to hit the U.S. Gulf Coast late next week,” NatGasWeather said. “However, the overnight data did trend the track toward Florida instead of the central U.S. Gulf Coast where natural gas infrastructure is greater.”
Any interruptions to Gulf production would apply bullish pressure to prices, while potential bearish impacts would include any disruptions to U.S. LNG exports, according to the firm.
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Ushering in the official start to the fall season, weekly natural gas cash prices gave up substantial ground amid mild temperatures, fading cooling demand and rising production. NGI’s Weekly Spot Gas National Avg. for the Sept. 19-23 trading period fell $1.185 to $6.485. Heat early in the week quickly dissipated by midweek and, as the…
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