Natural gas price posted a mostly sideways trade last week before settling slightly lower for the week. Volume was below average which may have helped tone down the price action.
October Natural Gas finished the week at $2.924, down $0.006 or -0.20%.
Fundamentally, the news wasn’t earth shattering. The national weather suggests lower demand due to cooler temperatures, but the real weather-market driver is likely to be the hurricane which hit several key production areas in Texas over the week-end.
In other news, according to the U.S. Energy Information Administration, natural gas in storage in the U.S. rose by 43 billion cubic feet in the week-ended August 18. Traders had priced in a 43 bcf increase.
The EIA also said that U.S. natural gas storage stood at 3.125 trillion cubic feet, 6.7% lower than levels at this time a year ago and 1.5% above the five-year average for this time of year.
Forecast
The natural gas news coming out of Texas is potentially bullish for prices on Monday. Due to the uncertainty over the hurricane damage, I suspect short-sellers are going to cover enough to trigger a gap-higher opening.
According to the latest reports from Reuters, about 26 percent of Gulf natural gas production is offline, or about 835 million cubic feet per day.
About 25 percent of U.S. Gulf of Mexico oil production is offline due to Tropical Storm Harvey, the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement.
That equates to roughly 428,568 barrels of oil per day of the roughly 1.75 million bpd pumped from the Gulf. The amount of oil production offline increased from Friday, when roughly 22 percent of output was affected.
Roughly 112 platforms have been evaluated in the Gulf so far as a result of Harvey, about 15 percent of those in the region. Have of the drilling rigs in the Gulf have also been evacuated.
I expect natural gas to open sharply higher until investors get a damage assessment from the storm. This is not a major producing area so gains are likely to be limited. However, were there is uncertainty, there are speculators so we’re not sure how much prices will move.
This article was originally posted on FX Empire