Boosted by late-season heat, domestic storage issues and robust global demand, natural gas futures rallied on Wednesday for a fifth straight session. October Nymex gas futures climbed 83.0 cents day/day and settled at $9.114/MMBtu, marking its biggest jump in the latest bull run. November gained 83.3 cents to $9.167.
In short :
NGI’s Spot Gas National Avg. rose 28.0 cents to $8.155, extending its rally to three days amid a re-emergence of summer heat in the country’s midsection.
The natural gas market is moving “increasingly strong,” Evercore ISI analysts said Wednesday.
They noted robust demand for US LNG exports – close to capacity – as Europe scrambles to stave off an energy crisis accelerated by Russia’s war in Ukraine. Russia, long one of the continent’s main gas suppliers, has halted most of its pipeline deliveries to countries in Europe. Asian countries are now stepping up their calls for liquefied natural gas as they rush to bolster supplies ahead of winter.
Additionally, the Evercore team noted that the shift from coal to gas in the power sector continues to increase as the United States steadily moves away from coal-fired power plants. And, of course, the seemingly endless summer heat continues to scorch much of the country well into mid-September. Markets as far north as the Dakotas are expected to see highs in the 90s this week, keeping air conditioners at the level once reserved for brief stretches from July through early August.
“We must acknowledge the strong support for both higher LNG shipments” and “more importantly a hot summer,” Evercore analysts added.
Zongqiang Luo, senior analyst at Rystad Energy, expects both strong domestic gas consumption and sustained LNG demand. He also noted the fallout from Russia’s actions and expectations that Europe will need as much US LNG as possible to ensure adequate supplies for the coming winter.
“Months of geopolitical wrangling have left the European gas market whipped, with volatile prices resulting from a lack of supply, potential market intervention and wider uncertainty,” Luo said. “In the opinion of most experts and policy makers, ‘the European gas market’ is broken. But how this should be taken care of or corrected is an ongoing conversation with no clear resolution in sight.
For now, however, he said LNG from the United States and elsewhere is at least a vital part of the continent’s energy survival. Luo said total LNG imports to Europe in the first eight months of 2022 were 60% higher than the same period last year. A year ago, Russian supplies accounted for around a third of European gas; they now represent less than 10%.
NatGasWeather noted that a threat of a rail strike in the United States may have also boosted bullish sentiment in the market.
Most notably, the forecast continues to show lingering heat. “Overnight data has kept an unusually strong high pressure expanding to reign over much of the United States next week, September 18-22, resulting in temperatures well above normal,” NatGasWeather said Wednesday. .
Against a backdrop of strong demand, domestic supply also remains precariously low for this time of year. The year-over-five storage deficit is expected to “only improve slightly” in the coming weeks, according to NatGasWeather.
The U.S. Energy Information Administration (EIA) is expected to release its storage data for the week ending September 9 at 10:30 a.m. ET Thursday.
A Bloomberg survey found a median prediction for an increase of 71 billion cubic feet. Injection predictions ranged from 62 Bcf to 80 Bcf. The Reuters poll revealed estimates covering builds of 64 to 78 billion cubic feet, with a median estimate of 72 billion cubic feet. The Wall Street JournalThe survey landed at an average injection expectation of 75 billion cubic feet. Estimates ranged from 70 to 78 billion cubic feet.
Actual construction in the comparable week of 2021 was 78 billion cubic feet, and the five-year average was 82 billion cubic feet, according to the EIA.
If the EIA printed an injection in the low to mid-70s, it would leave stocks more than 11% below the five-year average. With high demand across the seasons, the market has maintained an inventory deficit throughout 2022.
Spot gasoline prices surged on Wednesday, continuing an unrelenting winning streak for the week, led by gains in the sunny central United States.
Chicago Citygate jumped 32.5 cents a day to an average of $8,080. Elsewhere in the Midwest, Defiance gained 28.0 cents to $7,990 and Consumers Energy rose 31.0 cents to $8,085.
In the Midcontinent, ANR SW climbed 45.0 cents to $7,920, and in Texas, Katy climbed 31.5 cents to $7,910.
NagGasWeather said that aside from abnormally high temperatures in parts of the Midwest and Northern Plains, a “messy pattern” of weather systems with rain will spread across the United States at the end of this week, bringing bouts of cooler air.
Still, hotter exceptions must remain in Texas and much of the South, the firm said, with highs in the 90s this week. Then next week the forecast shows the eastern two-thirds of the Lower 48 warming above normal with highs in the 80s and 90s.
Meanwhile, Wood Mackenzie analyst Kara Ozgen noted that the United States has passed what the National Oceanic and Atmospheric Administration considers the peak of hurricane season – September 10 – without major storms causing widespread cooling winds and rains.
Still, she says, hurricanes are always an impending wildcard before fall.
“While it’s promising to have made it this far out into the Atlantic without anything significant developing and reaching the shores, the threat of hurricanes in the Gulf and East Coast remains,” Ozgen said. Wednesday. “Currently there is some activity, but nothing that looks too promising.”