USA natural gas futures fell sharply on Monday, due to the tropical storm 'Franklin' in the Gulf of Mexico, which is expected to reach the shores of Texas and Louisiana on Wednesday, and is likely to cause power outages and the shutdown of LNG export plants, thereby affecting demand and causing a decrease in natural gas prices.
According to the Zhongtong Finance and Economics APP, USA natural gas futures fell sharply on Monday, due to the tropical storm 'Franklin' in the Gulf of Mexico, which is expected to reach the shores of Texas and Louisiana on Wednesday, and is likely to cause power outages and the shutdown of LNG export plants, thereby affecting demand and causing a decrease in natural gas prices.
According to reports, NatGasWeather.com states: 'Power outages, cooling demand destruction, and possible stagnation of LNG exports into and out of the Gulf of Mexico are expected to cause negative impacts greater than positive effects.'
EBW Analytics stated that although natural gas production in the Gulf of Mexico may decrease, 'the most likely scenario is a brief interruption of natural gas demand in the short term, but it will not cause sustained damage to the infrastructure,' and added that, excluding hurricane threats, 'the long-term supply reduction, technical impetus, and historical low prices for the October contract have created conditions for a rise at the end of the month.'
It is understood that over twenty years ago, hurricanes along the coast of the Gulf of Mexico often led to soaring natural gas prices. At that time, 20% of the natural gas in the USA came from the Gulf of Mexico, but now this nearshore area only produces 2% of the total natural gas production in the USA, whereas the crude oil production in this region accounts for 15% of the total US production.
On Monday, the New York Mercantile Exchange delivered price of October natural gas futures contracts was $2.170 per million British thermal units, down 4.6%, while the New York Mercantile Exchange delivered price of the October crude oil futures contracts rose 1.5% to $68.71 per barrel, and the November Brent crude oil futures delivered price rose 1.1% to $71.84 per barrel.
Although the storm threat has weakened natural gas prices, crude oil futures prices have risen from a 15-month low, as Hurricane 'Franklin' could disrupt energy operations in the Gulf of Mexico later this week.
Price Futures Group's Phil Flynn said, "The Atlantic storm is likely to cause at least some problems for oil transportation and offshore production." He added that the hurricane could make landfall along the coast of Texas and Louisiana, which is the center of the US oil & gas production, transportation, and refining.
Producers including Exxon Mobil (XOM.US), Chevron (CVX.US), Occidental Petroleum (OXY.US), and Shell (SHEL.US) have announced plans to evacuate staff and restrict drilling in response to the storm.