MS: Gas Price Surprisingly Strong
According to a recent notice by Morgan Stanley Research, the analysts are surprised at the strength of natural gas prices.
“Despite a consensus pointing to full storage, supply dislocations and a price-driven uptick in demand (coal to gas switching), prompt month natural gas prices strengthened for the second consecutive week to $3.74/mmbtu,” they report.
The analysts said they’d highlighted a turnaround season for nuclear facilities that started the third week of September, which showed a potential ~1 Bcf/d of incremental gas demand as a result.
They reported, “While NYMEX prices were well supported by cash (trading broadly $0.20-0.30/mmbtu back), we expect the price rise to lose steam ahead. The supply overhang should again weigh on prices, particularly as the market enters October. Further price increases are likely to discourage the coal to gas switching by utilities that will be a key balancing factor for the market into this winter. While the price move looks well supported, we look for volatility (in both directions) to continue.”
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