Natural gas futures were treading lightly early on Tuesday, with traders assessing recent bullish supply/demand signs that ignited an August rally against the unknowns of another potential hurricane lurking in the Atlantic and stubbornly high storage levels.
Coming off five straight gains, the September Nymex gas futures contract was up a half-cent to $2.194/MMBtu as of 8:40 a.m. ET.
National Weather Service (NWS) forecasts called for relatively mild northern temperatures through the current trading week. Additionally, following cooling winds and power outages delivered to the East Coast last week by the former Hurricane Debby, NWS data showed another tropical storm brewing in the Atlantic. Tropical Storm Ernesto had potential to build up to hurricane strength as it was expected to move north of Puerto Rico by midweek.
As of early Tuesday, Ernesto was not projected to strike the mainland United States. However, NWS forecasters cautioned that the trajectories of tropical storms that rapidly strengthen into hurricanes are wildcards.
Elsewhere, however, southern and western markets of the Lower 48 continued to bake under highs in the upper 80s to 100s this week. More of the same was forecast through late August. The heat was expected to spread further to the North next week, according to NWS.
Production, meanwhile, held steady but below summer highs. Wood Mackenzie estimated natural gas output at 100.6 Bcf/d on Tuesday, off more than 1.0 Bcf/d from the 30-day average. Production over much of early August has been curbed by maintenance projects in Appalachia, the Permian Basin and the Rockies.
At least in part because of the lighter output, analysts are looking for a seasonally slim storage print with the Energy Information Administration’s (EIA) inventory report on Thursday.
NGI modeled a 1 Bcf build for the week ended Aug. 9. If realized, it would fall 42 Bcf shy of the five-year average. Preliminary estimates submitted to Reuters ranged from a withdrawal of 8 Bcf to an injection of 30 Bcf, with an average increase of 19 Bcf.
EIA reported an injection of 21 Bcf for the week ended Aug. 2, notably below the five-year average build of 38 Bcf.
As of Aug. 2, natural gas stockpiles totaled 3,270 Bcf, or 15% above the five-year average. However, that surplus has narrowed from a 2024 high of 40% in March after a mild winter.
EBW Analytics Group’s Eli Rubin, senior analyst, said while the market “remains oversupplied,” a “historically small August storage build” could further cut into the surplus and support prices as the month wears on.
A recovery in LNG demand also has proven bullish so far in August, Gelber & Associates analysts said. They noted steady demand from both Asia and Europe. The latter is currently reporting robust storage levels, but the analysts said total capacity for stored gas for many European countries “remains small relative to potential winter demand. As a result, concerns over winter supply security have helped drive prices up” in Europe, and this adds a bullish undercurrent for the U.S. market.
Wood Mackenzie on Tuesday estimated seven-day liquefied natural gas demand at 12.3 Bcf/d. That was well above July lows near 10 Bcf/d after Freeport LNG was knocked offline by Beryl, the first hurricane of the season.
