November Nymex natural gas (NGX26) on Thursday closed down -0.035 (-1.09%).
Nat-gas prices fell from a 1.5-week high on Thursday and settled lower after weekly nat-gas storage rose more than expected, sparking long liquidation in nat-gas futures. The EIA reported Thursday that nat-gas inventories rose +85 bcf in the week ended October 2, above expectations of +82 bcf.
Nat-gas prices added to their losses on Thursday after US weather forecasts turned warmer, potentially reducing heating demand for nat-gas. The Commodity Weather Group said Thursday that forecasts shifted warmer, with above-average temperatures expected across most of the US through October 12.
Nat-gas prices initially moved higher on Thursday as the outlook for adverse weather in the US Gulf pushed producers to shut in nat-gas production. As of Thursday, the US shut in about 1.127 billion cubic feet per day, or about 57% of natural gas production in the Gulf in response to Hurricane Isaias forming in the US Gulf.
US (lower-48) dry gas production on Thursday was 110.3 bcf/day (+1.8% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 72.2 bcf/day (+0.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Thursday were 19.0 bcf/day (+5.5% 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.
Thursday's weekly EIA report was slightly bearish for nat-gas prices, showing an +85 bcf increase in US nat-gas inventories for the week ended October 2, above expectations of +82 but below the 5-year weekly average of +96 bcf. As of October 2, nat-gas inventories were down -3.9% y/y and +2.0% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of October 6, 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.