November Nymex natural gas (NGX26) on Tuesday closed up +0.116 (+3.66%).
Nat-gas prices settled sharply higher on Tuesday as ramped-up US exports shrink domestic supplies. LNG net flows to US LNG export terminals on Tuesday rose to 19.966 bcf/day, the most in 5.5 months. Gas prices also found support on Tuesday from a surge in European nat-gas prices to a 3.75-year high, as European supplies remain tight ahead of the winter season, when demand typically doubles, potentially boosting European demand for US gas supplies.
On the negative side, forecasts of above-normal US temperatures that could reduce nat-gas heating demand limited price gains on Tuesday. The Commodity Weather Group forecasts above-average temperatures across the eastern half of the US from October 22-26.
US (lower-48) dry gas production on Tuesday was 109.5 bcf/day (+0.6% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 68.1 bcf/day (-2.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 20.0 bcf/day (+12.4% w/w), according to BNEF.
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.
As a positive factor for gas prices, the Edison Electric Institute reported last 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.
Last 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 11, gas storage in Europe was 74% full, compared to the 5-year seasonal average of 89% 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 9 fell by 1 to 132 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.