Natural gas weekly summary & Isaias

Mike Zaccardi, CFA, CMT

Natural gas - The new prompt-month September contract traded in a range between $1.77 and $1.94 last week as traders weighed a not-so-impressive first half of August from a weather perspective. Production and LNG export demand have also been bouncing around on a daily basis. In terms of price-action last week, sellers opened the week on Monday morning as September fell from $1.85 to $1.77 but then buyers stepped in late Monday through Wednesday morning to bring the market to a two week high near $1.94. The back half of last week features some selling activity. Thursday’s EIA storage report came in not far from expectations. It also marked the smallest injection of the season due to hot temps across the county – the reporting week covered mid-late July which is the climatological peak of cooling demand across the CONUS. Prices were steady into Friday afternoon and the month-end hit. This morning, natural gas is called sharply higher to $1.90, up a cool 6% as weather trended a bit warmer over the weekend, despite this week being rather soft. Daily injections are forecast to run larger than average before small daily builds are expected next week.

Weather - All eyes have been on Tropical Storm Isaias over the past few days, and that will continue through mid-week as the system begins to accelerate northward today. Power demand will be impacted from the Carolinas to New England. New York City may feel more effects than Florida did as the Big Apple is forecast to experienced wind gusts to near 60mph on Tuesday. Heavy rain will depress temperatures for tens of millions of Americans. PJM, NYISO, NE-ISO, and even parts of Canada will be impacted this week. The storm will pass though, and the tropics look to be rather quiet for the next 10 days after Isaias. Aside from the tropical storm, temperatures will be cooler than normal for a good chunk of the central USA while the coasts may see warmer than average conditions late this week and next week. The result will be natural gas demand for A/C load that will be weaker than usual this week and stronger than normal next week. The outlook beyond the next two weeks is uncertain, of course, but could be more of the same. The tropics should crank up later this month with the seasonal peak happening on September 11.

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Chart used with permission from TradingView.com