Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Natural Gas In For 3rd Week Of Wins As Heat Wave Hits

By Investing.com (Barani Krishnan/Investing.com)CommoditiesAug 20, 2020 04:16AM ET
www.investing.com/analysis/natgas-in-for-3rd-week-of-wins-as-heat-wave-hits-200534656
Natural Gas In For 3rd Week Of Wins As Heat Wave Hits
By Investing.com (Barani Krishnan/Investing.com)   |  Aug 20, 2020 04:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Natural gas bulls might just feel like taking a victory lap. And why not? 

Prices of the power generation fuel are up 35% since the start of August, and if they stay their course, could finish with a third straight winning week.

Natural Gas Weekly
Natural Gas Weekly

Forecasts from NatGasWeather, Bespoke Weather Services and EBW Analytics Group also point to unusual near-term warmth that could prompt Americans to crank up their air-conditioning more often, adding to power burns.

Eight Weeks Of Thin Storage Builds

Storage data due from the U.S. government today at 10:30 AM ET (14:30 GMT) is, meanwhile, expected to show an eight straight week of builds below the triple-digit mark, suggesting gas coming out of the ground was being consumed more than being put away for later use. 

“While the market has been looking forward to this build as it contains last week’s hot temperatures, it will also include the first indications if this month’s higher prices are taking a toll on the proportion of power generation going to gas over coal,” said Dan Myers, analyst at Gelber & Associates.

“The magnitude of this injection is likely to move the market one way or the other as it helps determine whether fundamentals can sustain the current rally or whether the recovery has gone too high, too fast,” added Myers in an email Wednesday to clients of the Houston-based gas risk consultancy. A copy of the email was sighted by Investing.com.

The September front-month natural gas contract on the New York Mercantile Exchange’s Henry Hub, hovered at $2.426 per million metric British thermal units by Thursday afternoon in Asia, versus this month’s low of $1.853 per mmBtu. For the week, it was up 2.97%, adding to the previous two weeks of 5.3% and 24.4% gains, respectively. Tuesday’s peak of $2.465 for the September contract also marked an 8-month high.

A survey of analysts tracked by Investing.com showed that U.S. utilities likely injected a near-normal 43 billion cubic feet of natural gas into storage during the week to Aug. 14 as higher air conditioning use during hot weather offset demand destruction from the coronavirus.

That injection compared with an increase of 56 bcf during the same week a year ago and a five-year (2015-2019) average build of 44 bcf for the period.

In the prior week to Aug. 7, utilities injected 58 bcf of gas into storage.

If analysts are on target, the increase during the week ended Aug. 14 would boost stockpiles to 3.375 trillion cubic feet (tcf). That would be about 15.1% higher than the five-year average and 21.4% above the same week a year ago.

Hotter-Than-Normal Weather

The weather was hotter-than-normal last week, with 102 cooling degree days (CDDs), compared with a 30-year average of 85 CDDs for the period. CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit (18 degrees Celsius).

Myers of Gelber & Associates said another warm change to weather forecasts in the six-to-ten day period was strengthening power demand forecasts for next week, with heat working its way across the U.S. Midwest and Northeast regions. 

Analysts at EBW were quoted by Naturalgasintel.com as saying they saw the recent NYMEX gains as being “durable” from a seasonal perspective based on fundamentals. They noted that the seven-day moving average for production has moved 0.4 bcf per day lower over the past week, while the seven-day moving average for LNG feed gas demand had climbed 0.5 bcf daily.

“While core fundamentals will not tighten at 0.9 Bcf/d per week forever, as long as LNG exports continue to rise while production declines, natural gas prices are likely to remain on an upward trajectory.” naturalgasintel.com quoted an EBW note as saying.

The current end-of-October storage trajectory nearing 4 trillion cubic feet may limit further upside, and any bearish catalyst, such as possible demand losses from brewing tropical storms, “may trigger a near-term correction.”

Mobius Risk Group, meanwhile, noted that gains have extended further out the curve as well, with 18 positive daily changes logged for the November 2020 NYMEX contract since early July and 17 positive daily changes for November Title Transfer Facility (TTF) futures. Over that same period, there have been 11 down days for the November NYMEX contract and 14 down days for the corresponding TTF contract.

In the naturalgasintel.com post, Mobius said:

“From start (July 7) to finish (Aug. 18), the November NYMEX contract has increased by 51 cents and November TTF has moved up 38 cents."

Benefits For LNG Too

The linkage between the domestic natural gas markets at downstream markets in Europe was also growing stronger, particularly on the liquefied natural gas front, according to Mobius. 

Furthermore, with the spread to Asia for the same delivery month at less than $2.00, the same could be said of the relationship between Henry Hub and the Japan Korea Marker (JKM). Mobius drew attention to the fact that this wasn’t a new dynamic, as an even more significant decrease in the TTF/JKM destination markets precipitated the collapse in Henry Hub earlier this summer season.

Myers concurred with that view, saying:

“The US is not the only country seeing hot temperatures press prices higher as LNG benchmarks in Asia and Europe have also undergone a considerable recovery since slipping to all-time lows back in late May and early June."

“Impressively, the Japan-Korea Marker (JKM) prices have surged above $4 this week, while the Dutch trading hub TTF has also seen prices above $3/MMBtu.”  

According to Myers, in Europe, reduced LNG cargoes from the US as well as strong coal-to-gas fuel switching have begun to provide balance to the market in recent weeks. 

“As the summer has gone on, European storage fill has slowed down sharply and, although inventories remain at the top of the 5-year range, they are now almost in line with 2019’s levels,” he said.

“With the international price recovery confirming a strengthening LNG market outlook, it has been a boon to Henry Hub prices.” 

US cargo cancellations for October are likely to be released later this week and should detail an even further reduction from September’s 15-26 cancellations as U.S. LNG export flows look to normalize in the late fall and winter.

Natural Gas In For 3rd Week Of Wins As Heat Wave Hits
 

Related Articles

Phil Flynn
The Energy Report: The Streak Is Broken! By Phil Flynn - May 27, 2022 1

I am incredibly happy to announce that my prediction that retail gasoline prices might peak during the Memorial Day Holiday weekend is coming true! AAA reports that the price of...

Fawad Razaqzada
Chart Of The Day: Gold Eyes $1,900 By Fawad Razaqzada - May 27, 2022 4

Gold and silver remain on course to end higher for the second consecutive week after ending their 4-week losing run as the US dollar and bond yields, including the 10-year Treasury...

Andy Hecht
U.S. Natural Gas: $10+ On The Horizon By Andy Hecht - May 27, 2022 5

Natural gas futures hit highest price since 2008 European prices hit all-time peak Russia will punish Europe US energy policy addresses climate change, but not geopolitical...

Natural Gas In For 3rd Week Of Wins As Heat Wave Hits

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
MICHAEL MARS
MICHAEL MARS Aug 20, 2020 1:55PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
heat wave non factor 3385 in storage super bearish
Barani Krishnan
Barani Krishnan Aug 20, 2020 10:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Looks like the forecast was spot on, 43 bcf. And now, some profit taking going on :)
Karan Oberoi
Karan Oberoi Aug 20, 2020 10:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what do you think NG will come down to 2.3 and then fire up the next month for 2.7-3 ?
dc wei wei dc
dc wei wei dc Aug 20, 2020 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Of course world peace!! Why would Russia attatck Europe, if energy and LNG is depended? common sense and a Good Potus !!! Trump 2020!! wwg1wga worldwide
Barani Krishnan
Barani Krishnan Aug 20, 2020 7:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Take your politics elsewhere. This is a natural gas column. Do this one more time on my column and I'll get the administrators to boot you out of the Investing forum.
Ashish Mittal
Ashish Mittal Aug 20, 2020 6:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Readers do not pay heed to his advice. please check his analysis on Copper exact opposite of price movement.
Barani Krishnan
Barani Krishnan Aug 20, 2020 6:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Ashish Mittal, using the avatar of the "Copper King" hasn't helped your intelligence, I see. Copper hit a high of 3.0002 in today's session. And what did I say in my copper column from three weeks ago (July 29): As Precious Metals Sizzle, Can Copper Break $3? And what happened today? Before you type, engage your brain first.
jonathan seagull
jonathan seagull Aug 20, 2020 5:51AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What? What hot weather? It’s so coolervthan usual in Chicago this summer.
Barani Krishnan
Barani Krishnan Aug 20, 2020 5:51AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Look at the data from last week, Jonathan. And the forecasts. That's published data.
Jan Skilbrei
Jan Skilbrei Aug 20, 2020 5:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks, maybe we can hope for a colder autumn, a fall in price, and a good buy before the winter
Barani Krishnan
Barani Krishnan Aug 20, 2020 5:17AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Let's see, Jan. Thanks for your feedback as always.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email