Hurricane Francine made landfall yesterday in Louisiana as a Category 2 hurricane with its impact now expected to be lower than initially feared. Production declines ahead of Francine’s landfall supported nat gas prices Wednesday although gains were somewhat limited by expectations for demand destruction in the wake of the storm. Oct futures settled 3.8 cents higher on the day.
Storage reports as of lately have consistently come in lower than expected due hard to predict changes in the South Central region. Today’s storage report is expected to show a much larger injection than the previous week’s 13 BCF build given a sharp decline in power burn during early Sep.
The EIA is expected to report a build of 48 BCF for the week ended Sep 6. This compares to last year’s build of 50 BCF and the 5 yr avg build of 67 BCF. If correct, stocks would rise to 3.395 TCF, or 9.8% above the 5 yr avg.
The EIA has lowered its end of October forecast to 3.896 TCF, 4% above the 5 yr avg.
LNG feedgas demand fell to 12 BCF/day on Wednesday and remains at that level this morning. With most LNG facilities not directly impacted by Francine, we should see gas flows begin to rise back up in the next few days.
Signs of declining gas fired power demand arose yesterday in the Southeast, running about 1 BCF/day lower than pre-storm levels. Given the arrival of cooler weather following the storm, Southeast power demand is projected to remain depressed, averaging about 10.7 BCF/day today thru the weekend.
Almost half of nat gas production in the Gulf was offline as of Wednesday afternoon with a total of 171 platforms and 3 rigs evacuated. The shut ins cut about 907 MMcf/day of nat gas with the GOM home to only 2% of nat gas output.
Prices are trading modestly lower this morning as the storage surplus is expected to narrow while the market attempts to asses the damage from Francine, which is now a tropical storm. The storm has rapidly weakened since making landfall, knocking out power to more than 390,000 customers.
The October 24 natural gas contract rallied up to a new 2-month high at 2.325 on Wednesday but pulled back to settle at 2.270, closing back under 2.301 weekly high resistance.
A breakout and close above 2.301 is needed to turn the trend back higher, but if resistance continues to hold, the primary trend will remain sideways to lower.
The October contract did close above the daily continuation chart 200 day moving average at 2.240 which is now support followed by the 10 day average at 2.210.
40 day moving average is the next area of support at 2.115.
A close above 2.301 will turn 2.350 and 2.400-2.410 into the next areas of resistance.
Bullish trend following oscillators and bullish divergences on the oscillators suggest the breakout may be to the upside. The 10 and 40 day moving averages are also 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 - 56.82
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