Weather Outlook:
Brrr! Frost and freeze conditions are forecast early this week across portions of the Plains, Mississippi Valley, Ohio Valley and Tennessee Valley.
Mild to warm weather for the remainder of the week across the Midwest, East and South will allow some late-season cooling demand along the Gulf Coast and back into Texas, but cold fronts beyond that will increase heating demand.
Natural Gas:
Strong Production Push & Hurricane Ida Helping to Boost Storage
- Storage is more likely to reach 3.4 Tcf by the end of October due to production at 99 Bcfand another intense week of injections due to HurricaneIan reducing demand. The NYMEX will be assessing the heating load in Nov/Dec.
- Although production appears to have reached 99 Bcf/d, Freeport LNG will be returning in November, and any potentially cold winter weather in December would be supportive of prices. Producers have focused on working thru existing inventories (DUCs) but will have to drill in 2023 to offset the natural decline rate in shale wells.
- The NYMEX has moved in a narrow range of $6.50 -$7.15/MMBtu the past few weeks, allowing power prices to consolidate. However, be aware of upside risks as we head into the back half of the fourth quarter, as winter can start fast.
- Freeport is slated to return in early November with a quick ramp-up to 2 Bcf/d by the end of the month. Any delay to Freeport’s Nov 1st start would be a bearish news event, but a steady flow of ~14 Bcf/d of LNG demand would support prices, especially in a cold start to winter scenarios for the U.S. & Europe.
- Prompt month NYMEX gas is currently at a 3-month low and seems to be finding support at the $6.50/MMBtu level amid strong production, shoulder month demand, and lower LNG send-outs.
- Larger-than-normal storage injections of129beatestimate (114) and was the 3rdweek of injections above 100 Bcf.
- Estimated September natural gas production looks strong at 99 Bcf/d, but producers continue to reduce available Drilled but Uncompleted wells to the lowest level since 2013.
- Cal 2023 power forwards were higher by 0.5-1.5% across the Northeast & Great Lakes. ERCOT was up 0.5%, while CAISO was higher by 2.5%.
EIA Residential Natural Gas Outlook
EIA’s latest Winter Fuels Outlook forecasts that U.S. households that primarily use natural gas for space heating will spend an average of $931 on heating this winter (October–March), which is $206, or 28%, more than last year.
Economy News
Current economic headwinds will likely create a more volatile economic environment in the coming years compared to the more stable environment of low-interest rates and low inflation that characterized most global economies of the past decade.
The International Monetary Fund (IMF) lessens their forecasts for global economic expansion on the heels of inflation, rising rates, the impact of war in Ukraine, Covid shutdowns in China, and a credit crisis.
