Natural Gas Prices Explode on Stronger Demand

September 24, 2020 06:51 AM
Natural gas futures rose more than 15% on Wednesday afternoon
U.S. natural gas production nearing 2-year low
Gasoline rebound curve has flattened
Natural Gas Futures

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Rallying from a 7-week low in the prior session, Henry Hub natural gas futures rose more than 15% on Wednesday afternoon as the demand outlook for natural gas improves.

At 1:16 p.m. ET, front-month natural gas futures rose by $0.270 to $2.104—up from its $1.845 open. Buyers will no doubt have their eye on that $2.00 threshold.

According to Refinitiv data, U.S. production of natural gas was on track to fall to its lowest in 2 years on Wednesday, to 83.8 billion cubic feet per day (bcfd).

On top of that, according to the same Refinitiv data, U.S. pipeline exports to Mexico were on track to reach 6.0 bcfd this month, compared to 5.9 bcfd last month. Total demand, including exports, is expected to reach 84.4 bcfd next week, from 82.0 bcfd this week.

Further bullish signals were sent to the market after Tropical Storm Beta came and went, leaving vessels free now—at least in some areas--to dock in the Gulf of Mexico, which has seen its fair share of disruptions this hurricane season. Some liquified natural gas (LNG)  facilities still remain shut-in as Beta moves its way through Texas after weakening to a post-tropical cyclone.

LNG feedgas, too, averaged 5.4 bcfd so far this month—the most since May and the second increase in a row.

The U.S. government storage report for Thursday is expected to show another bang-up number for the week ending September 18, with gas in storage possibly exceeding 4.0 trillion cubic feet—a high figure that would be hundreds of billions of cubic feet above year-ago levels and hundreds of billions of cubic feet above the 5-year average

 

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