Nat-Gas Prices Decline on Hopes Appalachia Pipeline to Be Repaired

October Nymex natural gas (NGV26) on Friday closed down -0.101 (-3.06%).

Nat-gas prices retreated Friday after Columbia Gas Transmission said it found the leak in a West Virginia pipeline that prompted a force majeure and expected to fix it over the weekend, easing concerns about an extended outage. 

On Thursday, nat-gas prices surged to a 2.5-month nearest-futures high after TC Energy’s Columbia Gas Transmission pipeline in Appalachia sent out a force majeure to customers due to an “unexpected mechanical issue.”  The outage is estimated to reduce firm transportation service by 1.8 bcf/day, about 1.6% of total US supply.

US (lower-48) dry gas production on Friday was 110.6 bcf/day (-0.5% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 69.0 bcf/day (-7.9% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 18.5 bcf/day (-1.6% 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 positive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended September 12 rose +16.1% y/y to 94,427 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending September 12 rose +3.3% y/y to 4,405,549 GWh.

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.  Last Monday, 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 mixed for nat-gas prices, as it showed a +53 bcf increase in US nat-gas inventories for the week ended September 18, above expectations of +51 but below the 5-year weekly average of +76 bcf.  As of September 18, nat-gas inventories were down -4.5% y/y and +2.9% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of September 23, gas storage in Europe was 70% full, compared to the 5-year seasonal average of 86% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ended September 25 rose by +1 to a new 3-year high of 135 rigs.