November Nymex natural gas (NGX26) on Wednesday closed up +0.089 (+2.86%).
Nat-gas prices extended this week’s rally on Wednesday, posting a 1.5-week high and settling sharply higher. Forecasts for cooler US weather that will boost heating demand for nat-gas boosted prices on Wednesday. The Commodity Weather Group said Wednesday that forecasts shifted cooler, with normal seasonal weather expected across the northern half of the US from October 11-16.
Expectations for a smaller-than-normal seasonal build in nat-gas storage also lifted prices on Wednesday. The consensus is that Thursday’s weekly EIA nat-gas inventories rose by +82 bcf for the week ended October 2, below the five-year average for the week of +96 bcf.
US (lower-48) dry gas production on Wednesday was 110.8 bcf/day (+3.0% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 71.5 bcf/day (-0.4% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 18.7 bcf/day (+2.3% w/w), according to BNEF.
As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended October 3 rose +3.32% y/y to 83,661 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending October 2 rose +3.27% y/y to 4,414,135 GWh.
A bearish medium-term factor for nat-gas prices is the market's expectation that a “Super El Niño” will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing heating demand for nat-gas.
As a bearish factor, the US Energy Information Administration (EIA) on August 11 projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average. On September 21, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.
Last Thursday's weekly EIA report was slightly bearish for nat-gas prices, showing a +64 bcf increase in US nat-gas inventories for the week ended September 25, above expectations of +63 but below the 5-year weekly average of +80 bcf. As of September 25, nat-gas inventories were down -4.1% y/y and +2.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of October 5, gas storage in Europe was 73% full, compared to the 5-year seasonal average of 88% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended October 2 fell by 2 to 133 rigs, down from a 3-year high of 135 rigs on September 25.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.