Nat-Gas Prices Fall on Larger Weekly Storage Build and Seasonal US Weather

November Nymex natural gas (NGX26) on Thursday closed down -0.065 (-1.93%).

Nat-gas prices settled lower on Thursday on a larger-than-expected build in weekly nat-gas storage, along with forecasts for mild US autumn weather that could curb heating and air-conditioning demand for nat-gas.  The EIA on Thursday reported that nat-gas inventories rose by +64 bcf in the week ended September 25, above expectations of +63 bcf.

Nat-gas prices were also pressured on Thursday on the outlook for seasonal temperatures after the Commodity Weather Group said forecasts shifted slightly cooler, with hot weather in the West expected to moderate in the coming weeks.

US (lower-48) dry gas production on Thursday was 110.9 bcf/day (+1.8% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 71.7 bcf/day (+5.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 18.1 bcf/day (-1.0% 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 negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended September 26 fell -0.85% y/y to 83,811 GWh (gigawatt hours).  However, US electricity output in the 52 weeks ending September 26 rose +3.27% y/y to 4,411,446 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 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 September 29, gas storage in Europe was 72% full, compared to the 5-year seasonal average of 87% 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 September 25 rose by +1 to a new 3-year high of 135 rigs.