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U.S. natgas futures hit near 2-week low on potential storm impact

U.S. natural gas futures hit a near two-week low on Friday on the potential impact of Hurricane Irma, which is expected to curtail demand as the storm approaches Florida in the U.S. Southeast. Front-month gas futures for October delivery on the New York Mercantile Exchange fell 9.1 cents or 3.1 percent to settle at $2.890 per million British thermal units. Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said the market had been unable to sustain price any advances because the outlook for weakening demand due to hurricane activity was “more than offsetting any potential loss of production.”

Prices fell to 2.885 per million British thermal units, the lowest level since Aug. 28. While Irma is not expected to affect gas production in the Gulf of Mexico, demand will likely decline due to evacuations and power supply outages in Florida. Lower gas prices also reflected the cooler temperatures expected to stem from Irma, Ritterbusch said. Irma, one of the most powerful Atlantic storms in a century, drove toward Florida on Friday after lashing the eastern Caribbean with devastating winds and torrential rain, killing at least 21 people and leaving a trail of destruction. Despite the hurricane’s destructive potential, Thomson Reuters projected U.S. gas consumption would rise to 69.60 bcfd next week from 67.60 bcfd this week.

Over the past 30 days, U.S. gas production in the lower 48 states rose to an average of 73.1 bcfd from 71.6 bcfd a year earlier. That is still far short of the 74.2 bcfd during the same time in 2015, when output was at a record high, Reuters data showed. U.S. exports are expected to average 8.9 bcfd this week, up about 19 percent from a year earlier, according to the data. U.S. utilities injected 65 billion cubic feet (bcf) of natural gas into inventories during the week ended Sept. 1, the U.S. Energy Information Administration reported on Thursday.

The build was in line with the 64 bcf injection projected by analysts in a Reuters poll, but above the 38 bcf build during the same week a year ago and a five-year average build for that week of 58 bcf. Utilities probably would stockpile 1.7 trillion cubic feet of gas during the April-October injection season, analysts said. Relatively low output, rising sales abroad and higher-than-average cooling demand earlier this summer have limited the amount of fuel going into storage this year. The projected build, compared with the five-year average of 2.1 tcf, would put inventories at around 3.8 tcf at the end of October, below the year-earlier record of 4.0 tcf and the five-year average of 3.9 tcf.
Source: Reuters (Reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by Bernadette Baum and Tom Brown)

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