

Nat gas prices gained 3% on Tuesday as the market attempted to gauge the impact of Tropical Storm Francine which is expected to become a hurricane by tonight. The market was already seeing production declines yesterday due to personnel evacuations from offshore wells. The storm is also expected to cut demand as it curtails gas flows to export plants while causing widespread power outages. Oct futures settled yesterday’s session 6.2 cents higher at $ 2.232.

Francine is weighing on feedgas demand with nat gas flows to exports plants sliding to 2 week lows. As of this morning, Platts shows feedgas demand at 11.8 BCF/day, down 1 BCF/day from yesterday and 1.6 BCF/day lower than the 1 week average of 13.4 BCF/day. Operators of the 3 LNG export terminals closest to the storm’s path, Sabine Pass, Cameron LNG and Calcasieu Pass, are monitoring the storm which is tracking east of the facilities.
Production has fallen below 100 BCF/day, projected this morning at 99 BCF/day.
This week’s storage report is expected to reveal an injection 4 times larger than the previous week as more moderate temps last week led to a sharp decrease in power burn. Gas demand for the reporting week tumbled 5.3 BCF/day due mostly to reduced power burn while production also continued to pull back.
Platts is projecting a build of 50 BCF for the week ended Sep 6 with Reuters at 49 BCF. The number compares to the 5 yr avg build of 67 BCF and last year’s build of 50 BCF. Thus, the surplus to last year would remain unchanged, the 5 yr avg surplus would fall to 306 BCF.

Prices are trading mixed this morning as Francine is causing a major pullback in both LNG feedgas demand and GOM production.

The October 24 natural gas contract reversed course back higher on Tuesday following Monday’s sell off regaining most of Monday’s losses to close the day at 2.232.
200 day moving average resistance at 2.245 has been broken in today’s early trade turning weekly highs at 2.294 and 2.301 into the next areas of resistance.
A breakout above 2.301 will turn the trend back up with 2.350 and 2.400-2.410 becoming the next areas of resistance. The longer term objective if resistance is broken is for trade up to 2.850.
If 2.294-2.301 resistance is not broken, the trend will remain sideways to down with 10 day moving average support at 2.175 followed by the 40 day average at 2.110.
Bullish divergences on trend following indexes favors a bullish breakout but this can quickly change if resistance is not broken. The 10 and 40 day moving averages are now in a bullish alignment.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 55.95






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