Natural Gas Bulls May Be In Luck With A Little More Heatwave Ahead

Natural Gas Bulls May Be In Luck With A Little More Heatwave Ahead

Investing.com  | Sep 12, 2019 09:37

With the heatwave across the U.S. expected to last a couple more weeks, keeping air-conditioning demand and the fuel’s prices bubbling, natural gas bulls are living on borrowed time before the inevitable onset of milder weather.

As traders await the U.S. Energy Information Administration’s gas storage report for the week ended Sept. 6, bets are that stockpile increases in the fuel will continue to be tempered for a while by air-cooling demand as temperatures remain unseasonably warm.

A Reuters poll of gas analysts published on Wednesday showed that U.S. utilities likely injected 82 billion cubic feet (bcf) into storage last week.

Lower Build Forecast For Last Week, But Markedly Higher Than A Year Ago

While that was slightly lower than the 84 bcf injection in the previous week to Sept. 30, it was much higher than the 68 bcf build noted during the same week a year ago. The five-year (2014-2018) average for injections, in comparison, was at 73 bcf.

Dominick Chirichella, director of risk and trading at the Energy Management Institute in New York, said temperatures should remain above normal across most of the United States over the next two weeks, with the heat peaking between days 6 and 10.

Said Chirichella: “Summer will not give up yet as above-normal temperatures are generally favored.”

Through the year to last week, the weather was warmer than normal with 82 cooling degree days (CDDs), against a 30-year average of 66. CDDs measure the number of degrees a day's average temperature is above 65 Fahrenheit (18 Celsius) and are used to estimate demand to cool homes and businesses.

Matter Of Time Before Stockpiles Start Spiking

Chirichella, however, cautioned that with the “shoulder season” for gas demand already in—a period that typically runs between mid September and October—it was a matter of time before gas stockpiles begin spiking from near record high production of the fuel.

According to data firm Refinitiv, gas production in the Lower 48 U.S. states rose to 92.9 billion cubic feet per day (bcfd) last week, which was close to the daily record high of 93.0 bcfd on Aug. 19.

Chirichella added:

“Even with several heat waves this summer, the injection season has been robust with the surplus over last year continuing to grow, while the deficit versus the five-year average is almost gone.”

Daniel Myers, gas analyst at Gelber & Associates in Houston, concurred, saying:

“Once the heat lets up, injections in late September could pick back up quickly as additional supply hits the market.”

So, what does this mean for gas prices?

At Wednesday’s settlement, the benchmark October gas contract on New York Mercantile Exchange’s Henry Hub fell 2.8 cents, or 1%, to $2.55 per million metric British thermal units (mmBtu).

NatGas 300-Min Chart - Powered by TradingView

Even so, the contract was headed for a weekly gain of almost 2% after accounting for Monday’s near 4% jump. If natural gas closes the week higher, it would be its third straight weekly gain, after surging 9% and 6% in the previous two weeks.

Prices Between 'Too Expensive' And 'Too Cheap'

Said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina:

“I can’t argue that $2.55 NatGas is out of value, but would consider calling October at $2.80 “too expensive” or $2.20 “too cheap”.

“As far as winter is concerned, considering the way the market loses its mind early in the winter, it’s cheap. A bull market could generate a $1 rally for dumb reasons in October and November.”

Investing.com, meanwhile, retains a “Strong Buy” for natural gas. On the site’s Daily Technical Outlook, the top-end resistance for October gas was given as $2.65, versus last week’s $2.61.

Investing.com

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+