Natural Gas Prices Soar as Hurricane Opal Causes Production Cuts

Strategic Insights -

Hurricane Opal is prompting worried energy companies to reduce natural gas production in the Gulf of Mexico, which could impact supply and prices this winter. Analysts estimate that about 12% of daily natural gas production in the United States has been cut back. This reduction, totaling around 6.2 billion cubic feet of natural gas per day, threatens to exacerbate the industry's lag in refilling storage plants for the winter heating season. As a result, natural gas prices for November delivery surged to $1.894 for 1,000 cubic feet, the highest daily settlement since December 12.

Key Takeaways:

  • The price of natural gas jumped 14.4 cents to $1.894 for 1,000 cubic feet, the highest daily settlement since December 12.
  • Production cuts amount to about 12% of daily natural gas production in the United States, with a total of 6.2 billion cubic feet of natural gas per day offline.
  • The slow-moving storm is expected to disrupt production for the remainder of the week, potentially prolonging the industry's lag in refilling storage plants for the winter heating season.
  • The American Gas Association reported that refilling was only 7.6% ahead of the pace of last year, with significant challenges ahead.
  • November unleaded gasoline prices rose 0.60 cent to 52.78 cents a gallon.
  • Crude oil prices increased 10 cents to $17.64 a barrel.
  • Soybean prices declined sharply on the Chicago Board of Trade due to better-than-expected yields and dry weekend weather in the Midwest.

Statistics:

  • Natural gas prices for November delivery surged 14.4 cents to $1.894 for 1,000 cubic feet.
  • The total production cutback amounts to approximately 6.2 billion cubic feet of natural gas per day.
  • Refilling storage plants for the winter heating season faces significant challenges, with the industry 7.6% behind the pace of last year.
  • Crude oil prices rose 10 cents to $17.64 a barrel.
  • November unleaded gasoline prices increased 0.60 cent to 52.78 cents a gallon.
  • Soybean prices declined 8.75 cents to $6.3725 a bushel.

Sources:

  • "Commodity Research Bureau index of 21 commodities dropped 1.38 points to 240.35."
  • John Saucer, energy analyst with Smith Barney Inc. in Houston, stating that the total production cutbacks totaled about 6.2 billion cubic feet of natural gas a day.
  • The American Gas Association's report from last week stating that refilling was about 7.6% behind the pace of last year.
  • The New York Mercantile Exchange data for energy prices.