December Nymex natural gas (NGZ26) closed up +0.125 (+3.89%) on Thursday.
Dec nat-gas prices settled higher on Thursday but remained below Wednesday’s 8-month nearest-futures high. Expectations of colder US weather boosting heating demand for nat-gas underpinned prices on Thursday. The Commodity Weather Group said Thursday that the outlook is trending cooler across the Midwest and Northeast for November 22-26.
Excessively short fund positions in NY nat-gas futures could add fuel to any short-covering rally. Last Friday’s weekly Commitment of Traders (COT) report showed funds boosted their short NY nat-gas positions by 11,426 in the week ended November 3 to a record net-short position of 636,576 (data from 2013).
Gains in nat-gas prices were limited on Thursday amid expectations of a larger-than-seasonal build in weekly gas storage. The consensus is that Friday’s weekly EIA nat-gas inventories will climb by +64 bcf for the week ended November 4, well above the five-year average for the week of +40 bcf.
Nat-gas prices sank to a 6.5-month nearest-futures low (X26) late last month as warm US autumn weather curbed heating demand for nat-gas and allowed US storage levels to climb. Also, expectations that the “Super El Niño” will bring warmer-than-normal temperatures to the Northern Hemisphere this winter and reduce nat-gas heating demand are weighing on prices.
US (lower-48) dry gas production on Thursday was 112.9 bcf/day (+1.6% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 83.1 bcf/day (-1.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals Thursday were 20.8 bcf/day (+1.3% w/w), according to BNEF.
As a positive factor for gas prices, the Edison Electric Institute reported Thursday that US (lower-48) electricity output in the week ended November 7 rose +2.4% y/y to 75,151 GWh (gigawatt-hours). Also, US electricity output in the 52 weeks ending November 7 rose +3.3% y/y to 4,425,114 GWh.
Tuesday’s monthly Short-Term Energy Outlook from the EIA was negative for nat-gas prices, as it raised its US 2026 nat-gas production estimate to 113 bcf/day from 112.2 bcf/day.
Last Thursday's weekly EIA report was bearish for nat-gas prices, showing an increase of +77 bcf in the week ended October 30, above the 5-year average of +61 bcf. As of October 30, nat-gas inventories were down -2.9% y/y and +1.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of November 10, gas storage in Europe was 72% 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 November 6 rose by +1 to 131 rigs, just below the 3-year high of 135 rigs posted on September 25.
On the date of publication, Rich Asplund did not directly have a position 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.