Following a more than 11 cent decline on Friday, the natural gas market extended gains into Monday’s session as what is now Hurricane Milton rapidly intensified over the weekend. The market priced in the likelihood of more widespread power outages and demand destruction across major portions of Florida that are still recovering from Hurricane Helene. Nov nat gas settled 10.8 cents lower at $2.746.
GOM output yesterday came in at just under 1.9 BCF/day as it continues to recover from shut ins prompted by Hurricane Helene. So far, Milton is expected to have limited impact on Gulf output.
Gas production in the Permian basin is hitting new highs thanks to the Matterhorn Express Pipeline. Flows on the pipeline have been steady, near 600 MMcf/day, helping dry output in the Permian to hit a record high of 20.6 BCF/day on Oct 5. The pipeline can transport up to 2.5 BCF/day, leaving room for growth into next year.
Utilities in the SE are bracing for another hurricane as 260,000 customers still remain without service as a result of Helene. Milton is expected to become a Cat 5 hurricane as it makes landfall late tomorrow or early Thursday along the western Florida Peninsula. While Milton is likely to impact production, it will bring a deeper loss of demand through power outages and cooler temps.
The 6-10 day forecast from Maxar shows cooler changes across the central US for the coming 6-10 day period. The forecast now features a round of much below normal temps for portions of the Midwest and South mid period with the cooler readings hitting the East Coast late in the period. The West will remain unseasonably warm.
Prices are currently trading lower as colder forecasts for next week aren’t supportive enough to counter bearish sentiment from Hurricane Milton that is heading straight towards the Florida coast.
Continued weakness was the theme for natural gas to start the week. The November contract settled at $2.746, down .108 cents. The low at $2.705 breached the September 27th low of $2.720, although the market closed above that level – so far.
Whether this is a corrective pattern or the end of the current rally will depend on the ability of the November contract to close above $2.720 and yesterday’s close of $2.746. The 62% retracement of the recent November move is also at $2.700. There is also a gap between $2.690 - $2.720 that was created by the November rollover that is likely to be filled before any rally resumes.
If the market fails to hold these levels, the next target is the $2.500 area.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 57.18
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