Natural gas futures reversed lower early Friday as traders and analysts continued to assess balances following the latest government inventory data and in the wake of a disruption to Gulf of Mexico (GOM) production volumes.
After surging 67.2 cents higher in the previous session, the September Nymex contract was off 16.4 cents to $8.710/MMBtu as of around 8:50 a.m. ET.
The Energy Information Administration (EIA) on Thursday reported a 44 Bcf injection into U.S. natural gas storage for the week ended Aug. 5, slightly higher than expectations but in line with historical norms.
Total Lower 48 working gas in underground storage finished the period at 2,501 Bcf, or 338 Bcf (minus 11.9%) below the five-year average.
“On a weather-adjusted basis, we estimate the market was balanced for the week versus 1 Bcf/d oversupplied the week prior,” analysts at Tudor, Pickering, Holt & Co. (TPH) said of the latest EIA print.
Meanwhile, following reports Thursday of a small oil leak forcing multiple Shell plc-operated GOM platforms to halt production, the incident appeared to be having a modest impact on supply based on estimates from Wood Mackenzie.
“Yesterday’s Gulf of Mexico production estimate was revised down about 170 MMcf/d to roughly 1.7 Bcf/d for a day/day drop of about 245 MMcf/d,” Wood Mackenzie analyst Laura Munder said in a note to clients early Friday.
Prices were pulling back early Friday as the market assessed the “likelihood of quickly restored supply,” EBW Analytics Group senior analyst Eli Rubin said.
The reaction to the GOM disruption potentially hints at how the market could respond to any tropical storm activity in the region in the months ahead, the analyst added.
“More broadly, the swift increase in Nymex gas futures and overwhelming market response to relatively mild stimuli over the past two days hints at the substantial latent upside price risks in the market,” Rubin said. “Last week, the news of a potential earlier-than-anticipated return at Freeport LNG sent gas prices careening higher.
“Liquidity is thin, exacerbating the extent of moves both higher and lower, while the market is on a perilously lower storage trajectory through winter 2022/23 and highly susceptible to any disruption in supply or increase in demand,” the analyst added.
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August 12, 2022 at 08:09PM
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September Natural Gas Pulls Back as Traders Continue Assessing Balances Following GOM Outage - Natural Gas Intelligence
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