Energy Prospectus

Why natural gas prices are set to soar . OilPrice.com
The highly volatile U.S. natural gas benchmark prices are set to trend higher in the coming months amid lower domestic production, higher demand in the winter, and recovering global gas prices in Europe and Asia—America’s key export destinations for liquefied natural gas (LNG). The coming winter season and the end of the hurricane season that has disrupted LNG operations and exports along the U.S. Gulf Coast, coupled with recovering gas demand for industrial activities in Asia and Europe, are likely to send natural gas prices to above $3 per million British thermal units (MMBtu) in the winter months, the natural gas futures curve and EIA estimates show.

Per EIA: U.S. LNG exports averaged 3.7 BCF per day in August. They are expected to soar to over 9.0 BCF per day in November at the same time U.S. demand for space heating will begin to ramp up. My take is that a cold December will cause a sharp decline in U.S. natural gas in storage. If so, it will be "Game On" for natural gas prices.

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Natural gas rocked back as storms and weather caused exciting scenarios. Andrew Weissman of EBW Analytics writes:

“October and November contracts were crushed early last week, due to disruption in LNG cargo loading caused by TS Beta which forced steep reductions in feedgas flows at Sabine Pass and Freeport, and very mild weather—pushing prices at Henry Hub to just $1.335. The October contract then rebounded sharply after feedgas flows started to recover, and posted further gains after EIA reported a much smaller-than-expected 66 Bcf injection and cash prices rebounded to $1.935—only to crash Friday again when October options expired."

Price action on Monday, when October expires, is uncertain. While cash prices in October are likely to average at least 50 cents above Friday’s close, downward pressure is still likely.

With demand even near seasonal lows, weighing on cash prices, the November contract could remain under pressure early this week. As the week progresses, though, demand is likely to increase. With cold weather expected a week from now, November could rebound sharply.