Natural gas futures surged higher in early trading Monday as traders and analysts gauged the potential energy impacts of another tropical cyclone bearing down on the Gulf Coast in the wake of Hurricane Ida. As of around 8:50 a.m. ET, the October Nymex contract had rallied 23.8 cents to $5.176/MMBtu.
Tropical Storm Nicholas was on track to “pass near or just offshore” the South Texas coast Monday morning, according to the National Hurricane Center. The storm was then expected to move onshore along the coast of southern or central Texas by Monday afternoon or evening.
“Strengthening is forecast today, and Nicholas could reach the northwest Gulf Coast as a hurricane,” forecasters said. “Weakening is anticipated on Tuesday and Wednesday while Nicholas moves over land.”
Nicholas arrives as Gulf of Mexico (GOM) production is still reeling from the impacts of Ida. According to Wood Mackenzie’s daily pipe production estimate, about 70% of GOM output was still offline early Monday.
“However, we have not seen any indication/notices of production impacts associated with Tropical Storm Nicholas,” Wood Mackenzie analyst Laura Munder told clients in a note.
Nicholas could present a threat to liquefied natural gas (LNG) exports out of Corpus Christi early this week, according to analysts at EBW Analytics Group.
“This morning’s pipeline nominations, however, remain stout,” the EBW analysts said. “LNG feed gas demand flows are showing a four-month high and an increase of 0.3 Bcf/d since Friday. Natural gas production has ticked higher since Friday but remains flat versus last week’s levels.”
While “fundamental support may align with bullish technicals” to boost futures higher Monday, there remains a “heightened risk for bearish revisions to initial pipeline flow nominations” that could “lead to softening later in the day,” the EBW analysts added.
In addition to LNG feed gas declines, Nicholas could impact production by bringing flooding rains to the Gulf Coast, according to NatGasWeather.
“It should be another volatile week in the natural gas markets after huge daily moves last week,” NatGasWeather said. “…The weekend weather data did add around 5-6 Bcf in demand, while the uncertainty of what impact Tropical Storm Nicholas brings to Texas could be reason” for prices to start the week higher.
October Nymex crude oil futures were up 77 cents to $70.49/bbl at around 8:50 a.m. ET.