Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
[Emma Ockerman, Bloomberg]
An early cold snap may deliver natural gas traders the most bullish inventory report heading into the winter heating season they’ve seen in more than a decade.
On Thursday, the U.S. government will issue its weekly estimate of gas stockpiles. And based on a Bloomberg New Energy Finance analysis, the report may show a gain of only 8 billion cubic feet. That’d be the smallest increase for this time of year since supplies of the heating fuel declined in 2006. (Back then, a combination of nuclear shutdowns and an early chill had power plants plowing through gas.)
A small inventory gain would be a rare win for bulls at this time of year, when gas suppliers are typically racing to store the fuel in preparation for the peak demand season. A cold snap’s to thank for stoking demand sooner: Temperatures are forecast to continue to dip well below normal from the U.S. Pacific Northwest to the Northeast through Nov. 10. As a result, natural gas burn may jump 24 percent in the Midwest alone from a year earlier, according to Bloomberg New Energy Finance.
The early demand surge threatens to exacerbate already-tight supplies and could lead to price spikes during the heating season should cargoes of liquefied natural gas continue to leave U.S. shores.
“We’re seeing a lot more demand than anticipated, and you’re probably going to see some pullback in production as well on seasonal maintenance,” Phil Flynn, senior market analyst for Price Futures Group, said by phone. “When you compare that to the five-year average, it makes it look a lot more bullish.”
Natural gas has continued to flow out of massive shale formations in the eastern U.S. at record-high levels, and that should help prevent major supply constraints, Bloomberg New Energy Finance analyst Het Shah said. But several pipelines proposed to carry gas out of those reservoirs are facing setbacks.
On Monday alone, TransCanada Corp. delayed the startup of its Leach Xpress gas project, which will ship Appalachian supplies, to January from Nov. 1, and Williams Partners LP was forced to temporarily halt construction on its Atlantic Sunrise project, also planned to deliver shale gas, due to a court order.
“The market has been banking on Leach” to help replenish U.S. gas stockpiles, Shah said. The delay only stands to keep “new supply from hitting the market,” he said.
U.S. gas futures for December delivery settled at a seven-week high Monday on the New York Mercantile Exchange. The median of four other analyst estimates compiled by Bloomberg show a gain of 14 billion cubic feet.A Subsidiary of Price Holdings, Inc. – a Diversified Financial Services Firm. Member NIBA, NFA Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018