Natural gas futures rose on Wednesday for the fifth consecutive session, buoyed by the late-season heat, domestic storage concerns and strong global demand. October gas futures on NYMEX rose 83.0 cents a day and settled at $9.114/MMBtu, marking the biggest jump in the latest rally. November gained 83.3 cents to $9,167.
NGI gas spot national average It rose 28.0 cents to $8.155, extending its rally to three days amid the return of summer warmth in the central section of the country.
Analysts at Evercore ISI said Wednesday that the natural gas market is moving “from strength to strength.”
They pointed to strong demand for US liquefied natural gas exports – which are hovering close to capacity – as Europe rushes to fend off an energy crisis accelerated by Russia’s war in Ukraine. Russia, which has long been a major supplier of gas to the continent, has cut off the bulk of pipeline deliveries to countries across Europe. Asian countries are now ramping up their calls for LNG as they move quickly to boost supplies before winter.
What’s more, the Evercore team noted, the shift from coal to gas in the energy sector continues to escalate as the United States steadily retires from coal plants. And of course, the seemingly endless summer heat continues to scorch much of the country into mid-September. Markets as far north as the Dakota are expected to endure spikes in the 1990s this week, keeping air conditioners operating at a level previously reserved for short shifts from July to early August.
“We should acknowledge strong support for both elevated LNG transmissions” and “more importantly hot summers,” Evercore analysts added.
Zongqiang Luo, chief analyst at Rystad Energy, expects continued strong domestic gas consumption and permanent LNG demand. He also pointed to the repercussions of Russia’s actions and its expectations that Europe will need as much US liquefied natural gas as possible to ensure adequate supplies for the coming winter.
“Months of geopolitical wrangling have left the European gas market in a tailspin, with price volatility brought on by supply shortages, potential market intervention, and broader uncertainty,” Lu said. “In the view of most experts and policy makers, the ‘European gas market’ is broken. But how to support or repair it is an ongoing conversation with no clear solution in sight.”
But for now, he said, liquefied natural gas 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 during the first eight months of 2022 were 60% higher than the same period last year. A year ago, Russian supplies accounted for nearly a third of Europe’s gas. They now make up less than 10%.
NatGasWeather noted that the threat of a rail strike in the US may also have boosted bullish sentiment in the market.
More clearly, the forecast continues to show persistent heat. “Overnight data maintained an unreasonably strong high pressure expansion to dominate much of the US next week, September 18-22, resulting in a wide spread above normal temperatures,” NatGasWeather said Wednesday.
On the back of strong demand, domestic supplies also remain precariously weak at this time of year. The five-year year-on-year storage deficit is likely to improve “only slightly” in the coming weeks, according to NatGasWeather.
The US Energy Information Administration (EIA) is scheduled to release its storage data for the week ending September 9 at 10:30 a.m. ET Thursday.
A Bloomberg survey found a median expectation for an increase of 71 billion cubic feet. Injection forecasts ranged from 62 to 80 billion cubic feet. A Reuters poll found estimates ranging from 64 billion cubic feet to 78 billion cubic feet, with an average estimate of 72 billion cubic feet. The Wall Street JournalThe survey landed at an average injection forecast of 75 billion cubic feet. Estimates ranged from 70 to 78 billion cubic feet.
Actual construction in the comparative week of 2021 was 78 billion cubic feet, and the five-year average was 82 billion cubic feet, according to the Energy Information Administration.
If an EIA print a syringe in the mid-1970s, it would leave stocks less than the five-year average by more than 11%. With demand rising across seasons, the market maintained a stock deficit throughout 2022.
Spot gas prices rose on Wednesday, continuing a relentless streak of gains throughout the week, led by gains in the sun-soaked central United States.
Aside from unusually high temperatures in parts of the Midwest and northern plains, a “chaotic pattern” of weather systems with precipitation will track across the US late this week, leading to bouts of cold air, NagGasWeather said.
However, the company said the hottest exceptions will remain in Texas and much of the South, with a spike in the 1990s this week. Then, next week, forecasts show two-thirds of the eastern lower 48’s temperature will rise 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 bringing cold winds and widespread rain.
However, she said, hurricanes are always looming and tend to fall.
“While it is promising to have made it this far in the Atlantic without any significant development and access to the coasts, the threat of hurricanes in the Gulf and East Coast remains,” Özgen said on Wednesday. “Currently, there are some activities, but nothing looks very promising.”