Natural Gas Price Fundamental Daily Forecast – Next Reaction Depends on Damage, if any, to LNG Facilities

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Natural gas futures soared to multi-year highs on Friday as radar showed Hurricane Ida appeared to be moving away from liquefied natural gas (LNG) export facilities as it spun toward New Orleans.

LNG export demand has been one of the factors supporting natural gas prices this summer. So damage to facilities would have cut off deliveries. This would have been a bearish development. Bullish natural gas traders would prefer to see LNG continue to flow as much as possible to keep exports strong.

Based on the current position of the hurricane, traders should know by Monday’s early opening whether key LNG facilities have been hit by the storm or spared from damage.

On Friday, October natural gas futures settled at $4.388, up $0.177 or +4.20%.

As of midday Friday, close to half (48.8% of the natural gas produced in the Gulf of Mexico (GOM) had been taken offline, according to reports. GOM natural gas production from federal waters was averaging 1.088 Bcf/d before the shut-ins began, according to the Interior Department’s Bureau of Safety and Environmental Enforcement (BSEE). Additionally, the GOM today provides around 5% of the nation’s natural gas supply.

Short-Term Outlook

Concerns about LNG demand, which makes up about 10% of total domestic consumption, was providing the support for natural gas on Thursday and Friday. At that time, Hurricane Ida was tracking to hit Louisiana export facilities.

NatGasWeather said Louisiana remained “in the crosshairs for the most dangerous eyewall,” with minor risks to Far East Texas. Impacts were expected to be highlighted by the loss of demand from rain, stronger wind generation, power outages and cooling. Declines in LNG exports also were expected.

“How much U.S. LNG feed gas drops by, and for how long, is dependent on if the Cameron LNG facility in Louisiana is impacted by a direct hit or not, as they average around 1.8 Bcf/d,” NatGasWeather said.

The firm pointed out that bulls would prefer to see LNG continue to flow as much as possible to keep exports strong. As such, they may prefer to see Cameron sacrificed over Sabine Pass LNG, which consumes 3.5 Bcf/d.

“This, of course, is assuming the track holds in the latest NHC and Global Forecast System forecasts,” NatGasWeather said. Ida also would need to be “strong enough to inflict damage to Cameron LNG, which isn’t a given, especially if the track of Ida shifts just slightly eastward.”

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This article was originally posted on FX Empire