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Futures Movers: Natural-gas futures rally, oil futures climb with output slow to recover from Ida

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Natural-gas futures rallied by more than 9% on Wednesday and oil prices climbed, with both commodities finding support on a sluggish return of energy output in the Gulf of Mexico in the wake of Hurricane Ida.

“It’s clear that the storm was one of the most damaging on record for offshore oil and gas production, as well as import/export terminals and refineries in Louisiana,” said Robbie Fraser, global research & analytics manager at Schneider Electric, in a market update. 

Late Tuesday, the Bureau of Safety and Environmental Enforcement estimated that more than 79% of Gulf of Mexico oil production and nearly 78% of natural-gas output remains shut-in following Hurricane Ida, a deadly and powerful storm that made landfall on the Louisiana Gulf Coast on Aug. 29.

Personnel are still evacuated from 79 production platforms, which account for 14.1% of the manned platforms in the Gulf, the BSEE said.

That’s “expected to contribute to strong crude and product draws” in coming data from trade group, the American Petroleum Institute, and the U.S. Energy Information Administration, said Fraser. “The first glimpse of that impact should come this week,” he said. The EIA will release its weekly petroleum supply data on Thursday, a day later than usual due to Monday’s labor Day holiday. The API’s oil data will be out late Wednesday.

West Texas Intermediate crude for October delivery
CL00,
+1.27%

CLV21,
+1.27%

rose 89 cents, or 1.3%, to $69.24 a barrel on the New York Mercantile Exchange. November Brent crude
BRN00,
+1.07%

BRNX21,
+1.07%
,
the global benchmark, was up 70cents, or 1%, at $72.39 a barrel on ICE Futures Europe.

Ida’s damage to U.S. offshore energy production is one of the most costly since back-to-back storms in 2005 cut output for months, Reuters reported Tuesday, citing the latest data and historical records.

“So far Hurricane Ida has resulted in 19.2 million barrels of production being lost, and with output still set to take a while to recover, these losses will only grow. Refinery operations appear to be making a quicker recovery,” said Warren Patterson, head of commodities strategy at ING, in a note, observing that just five refineries remain closed.

“These temporary closures amount to 1 million barrels a day of capacity, down from a peak of more than 2 million barrels a day. However, those refiners that have restarted are unlikely to be operating at full capacity at the moment,” he said.

On average, analysts expect the EIA on Thursday to report a decline of 7.4 million barrels in U.S. crude-oil stocks for the week ended Sept. 3, according to a survey conducted by S&P Global Platts.

They also forecast supply declines of 2.4 million barrels for gasoline and 2 million barrels for distillates, while refinery utilization is expected to drop by 5.7 percentage points to 85.6%.

Back on Nymex, October gasoline
RBV21,
+0.35%

tacked on 0.5% to $2.14 a gallon and October heating oil
HOV21,
+0.50%

added 0.5% to $2.13 a gallon.

October natural gas
NGV21,
+7.75%

rose 8.6% to $4.96 per million British thermal units, buoyed by production losses in the Gulf as well as tight U.S. inventories. Prices on Friday had settled at their highest since November 2018.

U.S. natural-gas supplies last week likely rose by about 39 billion cubic feet and if confirmed by the EIA in Thursday’s report, that would be 26 bcf less than the five-year average rise for the same week, said Christin Redmond, global commodity analyst at Schneider Electric. That would cause the “overall storage deficit to increase further.”

“Given ongoing production outages, mixed with a return of hotter temperatures, injections for the remainder of the month may be feeble as well,” she said.

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