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Trading natural gas? Investors anticipate Hurricane Ian price impact

By Angela Barnes

14:06, 28 September 2022

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In this article:
CVX
Chevron
181.80 USD
0.88 +0.490%
Natural Gas
Natural Gas
6.925 USD
-0.341 -4.700%
BP
BP - USD
35.90 USD
0.57 +1.620%

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Boats are moored in the Sarasota Bay as Hurricane Ian approaches on September 28, 2022 in Sarasota, Florida
Calm before the storm? Investors trading natural gas consider market impact of Hurricane Ian – Photo: Getty

US natural gas volatility risks remain elevated in the immediate term with traders anticipating production disruption as a Category 4 hurricane heads for Florida.

US natural gas price chart

At the time of writing on Wednesday, however, the October Nymex gas futures contract dropped 1.62% to $6.54/MMBtu. On Monday, futures spiked – and the price hovered around $6.90.

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Chevron and BP halt production ahead of hurricane

Energy giant Chevron (CVX) halted output at its Petronius and Blind Faith platforms ahead of the storm approaching.

Chevron (CVX) price chart 

BP (BP.) said it has also shut production and evacuated personnel from its Na Kika platform – and is shutting production and evacuating all essential personnel from its Thunder Horse platform too.

BP (BP.) price chart

“While producers have shuttered more than 190,000 b/d of crude and 0.184 Bcf/d of natural gas production, onshore demand destruction may soon reach 2-3 Bcf/d,” EBW Analytics highlighted on Wednesday.

Bearish and bullish factors causing price fluctuations

The downward price pressure on US natural gas is a result of good storage reports and record domestic production levels, as well as forecasts for milder weather through October. Demand is also expected to fall when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts down for maintenance. 

However, potential disruption from the storm has put upward pressure on prices.

Moreover, natural gas futures are still up around 100% in 2022 as surging prices in Europe and Asia keep up demand for US LNG exports.

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“Later this week, any damage wrought by Hurricane Ian, Cove Point LNG entering maintenance, the 20-day average slumping under the 100-day average, and pipeline nomination trends favouring higher production into month's end may weigh on prices,” EBW Analytics said in a note to clients.

“After this week's numerous catalysts pass, however, it is likely that the $2.21/MMBtu plunge is too much, too soon and any signs of cooler weather for mid-to-late October could prompt a rebound for the November contract by next week,” the group added.

 

US natural gas price outlook

The group also shared with clients its natural gas forecast for the next 30-45 days for the November 2022 contract.

It said it expected a price range of $6.91-$9.68/MMBtu.

“Any cold blast could reinforce winter shortage risks. A bearish outlook is increasingly baked-in to current consensus - and may pose price spike risks if anticipated loosening does not transpire. The heart of hurricane season could easily present a market-defining storm altering the most-likely price trajectory – as occurred the past two years.

“The underlying market structure asymmetrically favours another run higher at some point this fall. If substantial supply gains, bearish weather, or reduced LNG exports transpire, however, steep declines still pose a key downside price risk – and the bullish story may crack within 30-45 days,” EBW said.

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