Front-month gas futures for October delivery on the New York Mercantile Exchange rose 4.9 cents, or 2.2%, to $2.281 per million British thermal units (mmBtu) at 9:08 a.m. EDT (1308 GMT), putting the contract on track for its highest close since July 12.
Prices rose even though Francine was expected to cut gas demand by curtailing flows to Gulf Coast liquefied natural gas (LNG) export plants and by causing homes and businesses to lose power. Louisiana is home to three of the nation’s seven big operating LNG export plants.
Because over 75% of U.S. gas production comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico, analysts said hurricanes were more likely to reduce gas prices by cutting demand through power outages and knocking LNG export plants out of service.
That is different from 20 years ago when roughly 20% of the nation’s gas came from the federal offshore Gulf of Mexico. Back then Gulf Coast hurricanes usually caused gas prices to spike higher, but now that offshore region produces only about 2% of the country’s gas.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to fall to an all-time low and average in negative territory for a record 35th time this year.
Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six times in 2020 and once in 2023.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states slid to an average of 102.1 billion cubic feet per day (bcfd) so far in September, down from 103.2 bcfd in August.
On a daily basis, output was on track to drop by 2.7 bcfd over the past two days to a preliminary three-month week low of 100.0 bcfd on Wednesday as energy firms shut some Gulf Coast production ahead of Francine.
Meteorologists forecast weather across the U.S. would remain mostly warmer than normal through Sept. 26. Analysts noted that warm weather in mid-September still feels pretty mild and should not result in much gas demand for heating or cooling.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 99.4 bcfd this week to 99.8 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 13.1 bcfd so far in September, up from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023.
On a daily basis, however, total LNG feedgas was on track to decline to a two-week low of 11.7 bcfd on Wednesday as flows to the 2.0-bcfd Cameron LNG export plant in Louisiana fell from 1.9 bcfd on Tuesday to 0.9 bcfd on Wednesday, according to LSEG data. The NHC forecast Francine would hit near Cameron.
(Reporting by Scott DiSavino, Editing by Nick Zieminski)
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