Natural Gas Price Fundamental Daily Forecast – Prices Could Spike Higher if Laura Becomes Category 3 Hurricane

Natural gas futures are edging lower shortly after the regular session opening as some traders lighten up on speculative positions put in place in anticipation of a double-hurricane in the Gulf of Mexico after the National Hurricane Center downplayed the event.

At 13:51 GMT, October natural gas is trading $2.590, down $0.026 or -0.99%.

On Monday, natural gas futures surged as much as 10 cents, supported by a plunge in production ahead of two tropical storms moving through the Gulf of Mexico. Spot prices also jumped as warmer air was set to move into the Midwest, Mid-Atlantic and Northeast. Natural Gas Intelligence’s (NGI) Spot Gas National Average climbed 29.0 cents to $2.360.

The Bureau of Safety and Environmental Enforcement (BSEE) said based on a survey of 37 exploration and production company reports as of midday Monday, personnel had been evacuated from 281 Gulf of Mexico production platforms, representing nearly 44% of the 643 manned platforms.

The BSEE estimated that about 82% of the current oil production and 57% of the natural gas production in the Gulf had been shut-in.

Hurricane Update

The upside pressure subsided somewhat after the National Hurricane Center (NHC) reported that Tropical Storm Marco fell apart as it approached the southeastern Louisiana coast Monday, but Laura was expected to strengthen into at least a Category 2 hurricane prior to making landfall near the Texas/Louisiana border on Thursday.

Daily Forecast

Early Tuesday, the National Hurricane Center reported that Laura had indeed strengthened into a hurricane.

“The center of Laura will move away from Cuba and over the southeastern Gulf of Mexico this morning,” the forecaster said. “Laura is then forecast to move over the central and northwestern Gulf of Mexico tonight and Wednesday, approach the Upper Texas and Southwest Louisiana coasts on Wednesday night and move inland near those areas on Thursday.”

The approaching hurricane is expected to have an impact on both the supply and demand side.

On the supply side, the BSEE is estimating that offshore operators had shut in about 1.5 Bcf/d of natural gas production.

On the demand side, Genscape Inc. estimates as of early Tuesday showed a drop of 850 MMcf/d in liquefied natural gas (LNG) feed gas demand since Sunday.

Along with the LNG feed gas impacts, “demand destruction from clouds, rain, cooling and power outages” could offset any lost production from Laura, forecaster NatGasWeather said.

EBW Analytics Group is only going as far as to predict plenty of volatility, much of which depends on the size of Hurricane Laura at impact.

With the September futures contract set to expire on Thursday, prices could spike higher if Laura develops into a Category 3 hurricane.

If Laura weakens then prices could plunge over the near-term.

For a look at all of today’s economic events, check out our economic calendar.